Question

Required information [The following information applies to the questions displayed below.] Dyer, Inc., completed its first year of operations on December 31, 2018. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income statement: $113,500 Income Statement, 2018 Rent Revenue Expenses: Salaries and Wages Expense $28,400 Repairs and Maintenance Expense 12,900 Rent Expense 8,900 Utilities Expense 3,900 Travel Expense 2,900 Total Expenses Income 57,000 $ 56,500 You are an independent CPA hired by the company to audit the firm's accounting systems and financial statements. In your audit, you developed additional data as follows: a. Wages for the last three days of December amounting to $300 were not recorded or paid. b. The $390 telephone bill for December 2018 has not been recorded or paid. C. Depreciation of equipment amounting to $22,900 for 2018 was not recorded. d. Interest of $490 was not recorded on the notes payable by Dyer, Inc. e. The Rental Revenue account includes $3,900 of revenue to be earned in January 2019. f. Supplies costing $590 were used during 2018, but this has not yet been recorded. g. The income tax expense for 2018 is $6,900, but it won't actually be paid until 2019. -a. Did the adjustments have a significant overall effect on the company's net income? • Yes No -b. By what dollar amount did net income change as a result of the adjustments? Change in Net ncome $ (35,480) X

Answer 1

Solution: la Yes a 2) DYER, INC. Income statement For the year ended December 31, 2018 Revenues 109600 113500-3900 1b Adj effect on net income -300 b b -390 с -22900 d -490 e -3900 f -590 8 -6900 Change in net income -35470 Total revenues Expenses salaries and wages expense Repair and maintenance expense Rent expense Utilities expense Travel expense Depreciation expense supplies expense Interest expense Income tax expense 2870028400+300 12900 8900 42903900+390 2900 22900 590 490 6900 Total expense Net income 88570 21030