On December 31, 2007, the Rift Music Store reported net incomeof $1,200 and the

Question

On December 31, 2007, the Rift Music Store reported net incomeof $1,200 and the following account balances.

Cash                                                                       $1,425

Accountsreceivable                                               2,300

Prepaidinsurance                                                   1,200

Equipment &furnishings                                       3,200

Less: Accumulateddepreciation                            (500)

Accountspayable                                                   1,300

Wagespayable                                                        1,520

Owners’ equity (includes Net Income of$1,200)   4,805

After this information was prepared, the bookkeeper discoveredthat he had forgotten to make two necessary adjusting entries forthe year and, therefore, they were not reflected in the balancesshown. Information concerning the two missing adjusting entriesfollows:

Explanation / Answer

Assets

Amount

Liabilities

Amount

31-Dec Insurance Expense 400      PrepaidInsurance 400 31-Dec Wages Expense 375       WagesPayable 375

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