Adjustments Flood Relief Inc. prepares monthly financial statements and therefor

ID: 2395556 • Letter: A

Question

Adjustments

Flood Relief Inc. prepares monthly financial statements and therefore adjusts its accounts at the end of every month. The following information is available for June 2017:

Required:

1. For each of the following situations, identify and analyze the adjustment necessary on June 30, 2017. Do not round intermediate calculations. If required, round your final answers to the nearest dollar.

a. Flood received a $10,000, 4%, two-year note receivable from a customer for services rendered. The principal and interest are due on June 1, 2019. Flood expects to be able to collect the note and interest in full at that time. Assume a 360-day year.

b. Office supplies totaling $5,600 were purchased during the month. The asset account Supplies is increased whenever a purchase is made. A count in the storeroom on June 30, 2017, indicates that supplies on hand amount to $507. The supplies on hand at the beginning of the month total $475.

c. The company purchased machines last year for $170,000. The machines are expected to be used for four years and have an estimated salvage value of $2,000. Use straight line method of depreciation.

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item.

d. On June 1, the company paid $4,650 for rent for June, July, and August and increased the asset Prepaid Rent. It did not have a balance on June 1.

e. The company operates seven days per week with a weekly payroll of $7,000. Wage earners are paid every Sunday. The last day of the month is Friday, June 30.

f. Based on its income for the month, Flood estimates that federal income taxes for June amount to $2,900.

2. Assume that Flood Relief reports net income of $35,000 before any of the adjustments. What net income will Flood Relief report for June?

Activity Accounts Statement(s)

Explanation / Answer

If any doubt please comment

Activity Operaing Activities Accounts Interest receivable increases and interest revenue increases Statement(s) Balance Sheet and income statement Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues – Expenses = Net Income Interest receivable 33 33 Interest revenue 33 33 (10000*4%*30/360) b) Activity Operating Accounts Supplies decreases and supplies expenses increases Statement(s) Balance Sheet and income statement Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues – Expenses = Net Income Supplies -6468 6468 Supplies expenses 6468 -6468 (475+6500-507) c) Activity Operating Accounts Accumulated depreciation incraeses depreciation expenses increases Statement(s) Balance Sheet and income statement Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues – Expenses = Net Income Accumulated depreciation -3500 -3500 Depreciation exp 3500 -3500 (170000-2000)/4*1/12 d) Activity Operating Accounts Prepaid rent decreases Rent expenses increases Statement(s) Balance Sheet and income statement Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues – Expenses = Net Income Prepaid Rent ($1,550) -1550 Rent expenses 1550 -1550 e) Activity Operating Accounts Wages expenses increases and wages payable increases Statement(s) Balance Sheet and income statement Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues – Expenses = Net Income Wages payable $5,000 -5000 Wages expenses 5000 -5000 f) Activity Operating Accounts Income tax Expense Increase Income tax Payable Increase Statement(s) Balance Sheet and income statement Balance Sheet Income Statement Assets = Liabilities + Stockholders' Equity Revenues – Expenses = Net Income Income tax payable $2,900 -2900 Income tax exp 2900 -2900 ans 2 Net income $35000+33-6468-3500-1550-5000-2900 15615

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Adjustments Flood Relief Inc. prepares monthly financial statements and therefor

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