Dyer inc completed its first year of operations on December 31,2010. Because thi
ID: 2443567 • Letter: D
Question
Dyer inc completed its first year of operations on December 31,2010. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary statementsRental revenue $141000
Income revenue:
Salaries and wages expense= 28500
Maintenance expense= 12000
Rent expense= 9000
Utilities expense=4000
Gas and oil expense= 3000
Other expenses= 1000
Total expenses= 57500
Income $56500
You are an independent CPA hired by the company to audit the firms accounting systems and financial statements. In your audit, you developed additional data as follows:
A) Wages for the last three days of December amounting to $310 were not recorde or paid
b)The $400 teleohone bill for December 2010 has not been recorded or paid
c) Depreciation on rental autos amounting to $23000 for 2010 was not recorded
d)Interest of $500 was not recorded on the note payable by Dyer inc
e) The rental revenue account included $4000 of revenue to be earned in January 2010
f) Maintenance supplies costing $600 were used during 2010 but this has not been recorded
f) The income tax expense for 201 is $7000 but wont actually be paid until 2011.
Required:
1) What adjusting journal entry for each item a) through G) should be recorded at December 31, 2010?
2) Prepare in proper form, an adjusted income statement for 2010
3) Did the Adjustment have a significant overall affect on the company's net income?
Explanation / Answer
Required:
1) What adjusting journal entry for each item a) through G) should be recorded at December 31, 2010?
a) Wages $310
Wages Payable $310
b) Utiltites $400
Utilities Payable $400
c) Depreciation expense $23,000
Accumulated Depreciation $23,000
d) Interest expense $500
Interest payable $500
e) Rental revenue $4,000
Unearned rental revenue $4,000
f) Supplies expense $600
Supplies $600
g) Income tax expense $7,000
Income tax payable $7,000
2) Prepare in proper form, an adjusted income statement for 2010
Rental revenue $137,000
Less: expense
Salary and wages $28,810
Maintenance charges $12,600
Rent expenses $ 9,000
Utilities $ 4,400
Gas & Oil Expense $ 3,000
Other Expenses $ 1,000
Depreciation $23,000
Interest expense $ 500
Interest expense $7,000 $89,310
Net Income $47,690
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3) Did the Adjustment have a significant overall affect on the company's net income?
Yes – the adjustment entries have a significant affect on the company’s net income as the net income has reduced from $56,500 to $47,690, decreasing by $8,810.
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