Powers Rental Service had the following items that require adjustment at year en

Question

Powers Rental Service had the following items that require adjustment at year end.

a. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid.

b. Interest of $650 on a note receivable has been earned but not yet received.

Required:

1. Prepare the adjusting entries needed at December 31.

2. What is the effect on the ?nancial statements if these adjusting entries are not made?

Powers Rental Service had the following items that require adjustment at year end. Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid. Interest of $650 on a note receivable has been earned but not yet received. Required: Prepare the adjusting entries needed at December 31. What is the effect on the ?nancial statements if these adjusting entries are not made?

Explanation / Answer

Adjusting entries :

a) Earned $9,880 of revenue from the rental of equipment for which the customer had not yet paid.

Rents Receivable A/c Dr $9880

To Rental Income A/c $9880

b) Interest of $650 on a note receivable has been earned but not yet received.

Interest Receivale A/c Dr $650

To Interest Income A/c $650

2) An amount of $ 10530 ($9880 + $650) will be shwn less in Income statement and balance sheet.

which means net profit is shown less and corresponding Assets are also not recorded.

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