The accountant for Astaire Medical Co., a medical services consulting firm, mist

Question

The accountant for Astaire Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($23,250) and (b) accrued wages ($4,000). Indicate the effect of each error, considered individually, on the income statement for the current year ended August 31. Also indicate the effect of each error on the August 31 balance sheet. Enter all amounts as positive numbers. Enter "0" in those spaces where there is no overstatement or no understatement.

Error (a) The adjusting entry for unearned revenue earned during the year ($23,250) was omitted.

1. Revenue for the year would be $Overstated Understated $

2. Expenses for the year would be $ Overstated Understated $

3. Net income for the year would be $Overstated Understated $

4. Assets at August 31 would be $Overstated Understated $

5. Liabilities at August 31 would be $ Overstated Understated $

6. Stockholders' equity at August 31 would be $Overstated Understated $

Error (b) The adjusting entry for accrued wages ($4,000) was omitted.

1. Revenue for the year would be $ Overstated Understated $

2. Expenses for the year would be $ Overstated Understated $

3. Net income for the year would be $ Overstated Understated $

4. Assets at August 31 would be $ Overstated Understated $

5. Liabilities at August 31 would be $Overstated Understated

6. Stockholders' equity at August 31 would be $ Overstated Understated $

Explanation / Answer

Error (a) The adjusting entry for unearned revenue earned during the year ($23,250) was omitted.

1. Revenue for the year would be              $Overstated $23250   Understated $0

2. Expenses for the year would be             $ Overstated $0 Understated $0

3. Net income for the year would be          $Overstated $23250 Understated $0

4. Assets at August 31 would be           $Overstated $ 0 Understated $0

5. Liabilities at August 31 would be          $ Overstated $0        Understated $23250

6. Stockholders' equity at August 31 would be $Overstated $0 Understated $0

Error (b) The adjusting entry for accrued wages ($4,000) was omitted.

1. Revenue for the year would be                       $ Overstated $0             Understated $0

2. Expenses for the year would be                        $ Overstated $0       Understated $4000

3. Net income for the year would be                      $ Overstated $4000 Understated $0

4. Assets at August 31 would be                           $ Overstated $0           Understated $0

5. Liabilities at August 31 would be                       $Overstated $0                 Understated 4000

6. Stockholders' equity at August 31 would be         $ Overstated $0 Understated $0

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