Question

Adjustments and Errors At the end of May, the first month of operations, the following selected data were taken from the financial statements of Julie Mortenson, Attorney at Law, P.C.: Net income for May $126,300 Total assets at May 31 701,000 Total liabilities at May 31 231,000 Total stockholders' equity at 470,000 May 31 In preparing the financial statements, adjustments for the following data were overlooked: a. Unbilled fees earned at May 31, $9,280. b. Depreciation of equipment for May, $4,200. c. Accrued wages at May 31, $2,970. d. Supplies used during May, $2,600. Instructions: Determine the correct amount of net income for May and the total assets, liabilities, and stockholders' equity at May 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table below. Enter account decreases as negative amounts. If an effect is zero, enter "0". Adjustment (a) is presented as an example. Net Income Total Assets = Total Liabilities + Total Stockholders' Equity $126,300 $701,000 $231,000 $470,000 9,280 9,280 0 9,280 Reported amounts: Corrections: Adjustment (a) Adjustment (b) Adjustment (c) Adjustment (d) Corrected amounts 100

Answer 1

Required:

	Net income	Total Assets	=	Total liabilities	+	Total stockholder's equity
Reported amounts	$126,300	$701,000		$231,000		$470,000
Corrections:
Adjustment (a)	$9,280	$9,280		0		$9,280
Adjustment (b)	-$4,200	-$4,200		0		-$4,200
Adjustment (c)	-$2,970	0		$2,970		-$2,970
Adjustment (d)	-$2,600	-$2,600		0		-$2,600
Corrected amounts	$125,810	$703,480		$233,970		$469,510