At the end of August, the first month of operations, the following selected data were taken from the financial statements of Tucker Jacobs, an attorney:
Net income for August $112,500
Total assets at August 31 650,000
Total liabilities at August 31 225,000
Total owner’s equity at August 31 425,000
In preparing the financial statements, adjustments for the following data were overlooked:
• Unbilled fees earned at August 31, $31,900.
• Depreciation of equipment for August, $7,500.
• Accrued wages at August 31, $5,200.
• Supplies used during August, $3,000.
Instructions
1. Journalize the entries to record the omitted adjustments.
2. Determine the correct amount of net income for August and the total assets, liabilities, and owner’s equity at August 31. 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 first adjustment is presented as an example.
Net Income Total Assets Total Liabilities Total Owner’s Equity Reported amounts Corrections: $112,500 $650,000 $225,000 $425,000 Unbilled fees earned +31,900 +31,900 0 +31,900 Equipment depreciation __________ __________ ____________ ____________ Accrued wages __________ __________ ____________ ____________ Supplies used __________ __________ ____________ ____________ Corrected amounts
Answer:
1. Aug. 31 Accounts Receivable
Fees Earned31,900
Accrued fees earned.
31 Depreciation Expense
Accumulated Depreciation—Equipment 7,500
Equipment depreciation.
31 Wages Expense
Wages Payable5,200
Accrued wages.
31 Supplies Expense
Supplies3,000
Supplies used.
2.Total
Net Total Owner’s
Income Assets = + Equity
Reported amounts $112,500 $650,000 $425,000
Corrections:
Unbilled fees earned +31,900 +31,900 +31,900
Equipment depreciation –7,500 –7,500 –7,500
Accrued wages –5,200 0 –5,200
Supplies used –3,000 –3,000 –3,000
Corrected amounts $128,700 $671,400 $441,200
