Net income for April $120,000
Total assets at April 30 750,000
Total liabilities at April 30 300,000
Total owner’s equity at April 30 450,000
In preparing the financial statements, adjustments for the following data were overlooked:
• Supplies used during April, $2,750.
• Unbilled fees earned at April 30, $23,700.
• Depreciation of equipment for April, $1,800.
• Accrued wages at April 30, $1,400.
Instructions
1. Journalize the entries to record the omitted adjustments.
2. Determine the correct amount of net income for April and the total assets, liabilities, and owner’s equity at April 30. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. The adjustment for supplies used is presented as an example.
Net Income Total Assets Total Liabilities Total Owner’s Equity Reported amounts Corrections: $120,000 $750,000 $300,000 $450,000 Supplies used –2,750 –2,750 0 –2,750 Unbilled fees earned ———–— —––——–— —––—–—–— —––—–—–— Equipment depreciation ———–— —––——–— —––—–—–— —––—–—–— Accrued wages ———–— —––——–— —––—–—–— —––—–—–— Corrected amounts
Answer:
1. Apr. 30 Supplies Expense Supplies2,750 Supplies used. 30 Accounts Receivable Fees Earned23,700 Accrued fees earned. 30 Depreciation Expense Accumulated Depreciation—Equipment 1,800 Equipment depreciation. 30 Wages Expense Wages Payable1,400 Accrued wages. 2.Total Net Total Owner's Income Assets = + Equity Reported amounts $120,000 $750,000 $450,000 Corrections: Supplies used –2,750 –2,750 –2,750 Unbilled fees earned +23,700 +23,700 +23,700 Equipment depreciation –1,800 –1,800 –1,800 Accrued wages –1,400 0 –1,400 Corrected amounts $137,750 $769,150 $467,750
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