Selected account balances before adjustment for Intuit Realt

Selected account balances before adjustment for Intuit Realty at November 30, the end of the current year, follow:

Debits

Credits

Data needed for year-end adjustments are as follows:

The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life.

none

X

Chart of Accounts

none

X

Journal

1. Journalize the six adjusting entries required at November 30, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

1

Adjusting Entries

2

3

4

5

6

7

8

9

10

11

12

13

Solution

1

Adjusting Entries

2

3

4

5

6

7

8

9

10

11

12

13

Points:

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Explanation

none

X

Final Questions

2. What would be the effect on the income statement if adjustments (b) and (e) were omitted at the end of the year?

Over/Understated

Amount

Understated

Overstated

No effect

The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life.

Understated

Overstated

No effect

Understated

Overstated

No effect

Points:

3. What would be the effect on the balance sheet if adjustments (b) and (e) were omitted at the end of the year?

Over/Understated

Amount

The contra asset account credited when recording the depreciation of a fixed asset.

Understated

Overstated

No effect

Understated

Overstated

No effect

Understated

Overstated

No effect

Understated

Overstated

No effect

Understated

Overstated

No effect

Understated

Overstated

No effect

Points:

4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if adjustments (b) and (e) were omitted at the end of the year? selector 1

Understated

Overstated

No effect

Points:

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Explanation

	Debits	Credits
Accounts Receivable	$ 75,000
Equipment	250,000
Accumulated Depreciation-Equipment		$12,000
Prepaid Rent	12,000
Supplies	3,170
Wages Payable		–
Unearned Fees		10,000
Fees Earned		400,000
Wages Expense	140,000
Rent Expense	–
Depreciation Expense	–
Supplies Expense	–

Solution

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. a. Supplies Expense    2,620.00 $3,170 - $550 Supplies    2,620.00 $3,170 - $550 (Record the supplies used) b. Depreciation Expense    1,675.00 Accumulated Depreciation - Equipment    1,675.00 (record the depreciation on equipment) c. Rent Expenses    8,500.00 Prepaid Rent    8,500.00 (Record the rent expenses) d. Wages Expenses    2,000.00 Wages Payable    2,000.00 (record the wages due) e. Unearned Fees    6,000.00 $10,000 - $4,000 Fees Earned    6,000.00 $10,000 - $4,000 (record the fees earned) f. Accounts Receivable    5,380.00 Fees Earned    5,380.00 (record the fees earned) Answer 2. Amount Fees Earned Understated      6,000.00 Depreciation Expenses Understated      1,675.00 Net Income Understated      4,325.00 Answer 3. Accumulated Depreciation Understated      1,675.00 Total Assets Overstated      1,675.00 Unearned Fees Overstated      6,000.00 Total Liabilities Overstated      6,000.00 Owners\' Capital Understated      4,325.00 Total Liabilities & Owners\' Equity Overstated      1,675.00 Answer 4. Net Increase or decrease in cash on the Statement of Cash Flow No Effect                   -