Selected account balances before adjustment for Newhouse Realty at March 31, 201

Question

Selected account balances before adjustment for Newhouse Realty at March 31, 2014, the end of the current year, are shown below.

Data needed for year-end adjustments are as follows:

Supplies on hand at March 31, $650.

Depreciation of equipment during year, $1,080.

Rent expired during year, $6,600.

Wages accrued but not paid at March 31, $2,080.

Unearned fees at March 31, $4,160.

Unbilled fees at March 31, $4,950.

Required:

1. Journalize the six adjusting entries required at March 31, based on the data presented.

a.

b.

c.

d.

e.

f.

2. What would be the effect on the income statement if adjustments (b) and (e) were omitted at the end of the year? Enter all amounts as positive numbers.

3. What would be the effect on the balance sheet if adjustments (b) and (e) were omitted at the end of the year? Enter all amounts as positive numbers.

4. What would be the effect on the "Net increase or decrease in cash" on the statement of cash flows if adjustments (b) and (e) were omitted at the end of the year?

Debits Credits Accounts Receivable $71,740 Equipment 111,000 Accumulated Depreciation - Equipment $11,050 Prepaid Rent 9,000 Supplies 2,150 Wages Payable _ Unearned Fees 9,900 Fees Earned 418,960 Wages Expense 141,330 Rent Expense _ Depreciation Expense _ Supplies Expense _

Explanation / Answer

Required 1 :

a.   Supplies Expenses Dr.$1500

To Supplies $1500

  (Being $1500 of supplies consumed and remaining of $650 in hand at end )

b.   Depreciation Expenses Dr. $1080

To Accumulative Depreciation $1080

(Being Depreciation charged )

Note:- Depreciation is charged as per Cost method, deprecaiton is accumulated as provision, depreciation amount should not be charged to Equipment

c.      Rent Expenses Dr. $6600

To prepaid Rent $6600

  (Being prepaid rent considered as expense in current year)

d.    Wages Expenses Dr. $2080

To Wages Payable $2080

   (Being Wages Payable recorded)

e.    Fees Earned Dr. $4160

To Unearned Fees $4160

(Being Unearned fees recorded)

f. Accounts Receivable Dr. $4950

To fees Earned $4950

  (Being Unbilled fees recorded)

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