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Adjusting entries and errors
At the end of August, the first month of operations, the following selected data were taken from the financial statements of Tucker Jacobs, an attorney:
| Net income for August | $112,500 |
| Total assets at August 31 | 650,000 |
| Total liabilities at August 31 | 225,000 |
| Total stockholders’ equity at August 31 | 425,000 |
In preparing the financial statements, adjustments for the following data were overlooked:
1. Unbilled fees earned at August 31, $31,900.
2. Depreciation of equipment for August, $7,500.
3. Accrued wages at August 31, $5,200.
4. Supplies used during August, $3,000.
Instructions
1. Journalize the entries to record the omitted adjustments.
2. Determine the correct amount of net income for August and the total assets, liabilities, and stockholders’ equity at August 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. Adjustment (a) is presented as an example.
| Net Income | Total Assets | = | Total Liabilities | + | Total Stockholders’ Equity | |
| Reported amounts | $112,500 | $650,000 | $225,000 | $425,000 | ||
| Corrections: | ||||||
| Adjustment (a) | +31,900 | +31,900 | 0 | +31,900 | ||
| Adjustment (b) | ____ | ____ | ____ | ____ | ||
| Adjustment (c) | ____ | ____ | ____ | ____ | ||
| Adjustment (d) | ____ | ____ | ____ | ____ | ||
| Corrected amounts | ____ | ____ | ____ | ____ |
Expert Answer
| Date | Accounts Title | Dr | Cr | ||||
| 31-Aug | Accounst Receivable | $31,900 | |||||
| Fees revenue | $31,900 | ||||||
| 31-Aug | Depreciation expenses | $7,500 | |||||
| Accumulated Depreciation-Equipment | $7,500 | ||||||
| 31-Aug | Wages expenses | $5,200 | |||||
| Wages payable | $5,200 | ||||||
| 31-Aug | Supplies expenses | $3,000 | |||||
| Supplies | $3,000 | ||||||
| Net Income | Total Assets | = | Total Liabilities | + | Total Stockholders’ Equity | ||
| Reported amounts | $112,500 | $650,000 | $225,000 | $425,000 | |||
| Corrections: | |||||||
| Adjustment (a) | 31,900 | 31,900 | 0 | 31,900 | |||
| Adjustment (b) | -7500 | -7500 | 0 | -7500 | |||
| Adjustment (c) | -5200 | 0 | 5200 | -5200 | |||
| Adjustment (d) | -3000 | -3000 | 0 | -3000 | |||
| Corrected amounts | $128,700 | $671,400 | $230,200 | $441,200 |
