1a. On June 15, McGinn Corp is paid $100,000 for consulting services they have n

Question

1a. On June 15, McGinn Corp is paid $100,000 for consulting services they have not performed yet. McGinn promises to perform the services within the next two months, with a deadline of August 15. Show the journal entry on June 15.

1b. Show the adjusting journal entry made on June 30, the end of the quarter.

1c. If McGinn's accountant forgot to make the above adjusting journal entry, what is the effect if this omission on the reported financial statements? On each line, write either Overstated, Understated, or No Effect.

Revenues _________

Expenses ________

Net income _____

Assets ______

Liabilities _____

Owners Equity ____

Explanation / Answer

1a Cash 100000      Unearned revenue 100000 b Unearned revenue 25000        Service revenue 25000 c Revenues Understated Expenses No Effect Net income Understated Assets No Effect Liabilities Overstated Owners Equity Understated

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