Effects of Errors on Financial StatementsThe accountant for Healthy Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($24,070) and (b) accrued wages ($5,480).Indicate the effect of each error, considered individually, on the income statement for the current year ended August 31. Also indicate the effect of each error on the August 31 balance sheet.Enter all amounts as positive numbers. Enter "0" in those spaces where there is no overstatement or no understatement.Error (a) The adjusting entry for unearned revenue earned during the year ($24,070) was omitted. OverstatedUnderstated1. Revenue for the year would be$fill in the blank 1$fill in the blank 22. Expenses for the year would be$fill in the blank 3$fill in the blank 43. Net income for the year would be$fill in the blank 5$fill in the blank 64. Assets at August 31 would be$fill in the blank 7$fill in the blank 85. Liabilities at August 31 would be$fill in the blank 9$fill in the blank 106. Stockholders' equity at August 31 would be$fill in the blank 11$fill in the blank 12 Error (b) The adjusting entry for accrued wages ($5,480) was omitted. OverstatedUnderstated1. Revenue for the year would be$fill in the blank 13$fill in the blank 142. Expenses for the year would be$fill in the blank 15$fill in the blank 163. Net income for the year would be$fill in the blank 17$fill in the blank 184. Assets at August 31 would be$fill in the blank 19$fill in the blank 205. Liabilities at August 31 would be$fill in the blank 21$fill in the blank 226. Stockholders' equity at August 31 would be$fill in the blank 23$fill in the blank 24

Adjusting entries: Adjusting entries refers to the entries that are made at the end of an accounting…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Effects of Errors on Financial Statements

The accountant for Healthy Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($24,070) and (b) accrued wages ($5,480).

Indicate the effect of each error, considered individually, on the income statement for the current year ended August 31. Also indicate the effect of each error on the August 31 balance sheet.

Enter all amounts as positive numbers. Enter "0" in those spaces where there is no overstatement or no understatement.

Error (a) The adjusting entry for unearned revenue earned during the year ($24,070) was omitted.

	Overstated	Understated
1. Revenue for the year would be	$fill in the blank 1	$fill in the blank 2
2. Expenses for the year would be	$fill in the blank 3	$fill in the blank 4
3. Net income for the year would be	$fill in the blank 5	$fill in the blank 6
4. Assets at August 31 would be	$fill in the blank 7	$fill in the blank 8
5. Liabilities at August 31 would be	$fill in the blank 9	$fill in the blank 10
6. Stockholders' equity at August 31 would be	$fill in the blank 11	$fill in the blank 12

Error (b) The adjusting entry for accrued wages ($5,480) was omitted.

	Overstated	Understated
1. Revenue for the year would be	$fill in the blank 13	$fill in the blank 14
2. Expenses for the year would be	$fill in the blank 15	$fill in the blank 16
3. Net income for the year would be	$fill in the blank 17	$fill in the blank 18
4. Assets at August 31 would be	$fill in the blank 19	$fill in the blank 20
5. Liabilities at August 31 would be	$fill in the blank 21	$fill in the blank 22
6. Stockholders' equity at August 31 would be	$fill in the blank 23	$fill in the blank 24

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