Errors in Financial Statements At the end of the current year, Jodi Corporation's controller discovers the following items of information: Salaries are paid every Friday for a 5-day work week. The normal weekly payroll is $40,000. The year-end falls on a Tuesday this year. The company has a $20,000, 9-month, 12% (annual rate) note payable outstanding at the end of the year. The note was issued on October 1; the interest is due when the note is paid. Examining the Rent Expense account, the controller finds that it includes a $4,800 advance payment for 3 months' rent. The payment was made on November 1. The storeroom contains $500 of office supplies. At the beginning of the year, there were no office supplies. During a year, the company purchased $3,500 of office supplies which were debited to the Office Supplies account. The company received a large order in May with a $13,000 advance payment. The advance payment was credited to Unearned Revenue. In November, the order was delivered to the customer. Required: For each of the preceding items, indicate the effect on net income, assets, liabilities, and shareholders' equity in the financial statements of the company for the year if the controller fails to make an adjusting entry for the item (ignore income taxes). (Contributed by Paula L. Koch) Enter all amounts as positive numbers. Liabilities overstated by $fill in the blank 2, net income and shareholders' equity understated by $fill in the blank 4. Liabilities by $fill in the blank 6, net income and shareholders' equity by $fill in the blank 8. Assets by $fill in the blank 10, net income and shareholders' equity by $fill in the blank 12. Assets by $fill in the blank 14, net income and shareholders' equity by $fill in the blank 16. Liabilities by $fill in the blank 18, net income and shareholders' equity by $fill in the blank 20.

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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Errors in Financial Statements

At the end of the current year, Jodi Corporation's controller discovers the following items of information:

Salaries are paid every Friday for a 5-day work week. The normal weekly payroll is $40,000. The year-end falls on a Tuesday this year.
The company has a $20,000, 9-month, 12% (annual rate) note payable outstanding at the end of the year. The note was issued on October 1; the interest is due when the note is paid.
Examining the Rent Expense account, the controller finds that it includes a $4,800 advance payment for 3 months' rent. The payment was made on November 1.
The storeroom contains $500 of office supplies. At the beginning of the year, there were no office supplies. During a year, the company purchased $3,500 of office supplies which were debited to the Office Supplies account.
The company received a large order in May with a $13,000 advance payment. The advance payment was credited to Unearned Revenue. In November, the order was delivered to the customer.

Required:

For each of the preceding items, indicate the effect on net income, assets, liabilities, and shareholders' equity in the financial statements of the company for the year if the controller fails to make an adjusting entry for the item (ignore income taxes). (Contributed by Paula L. Koch)

Enter all amounts as positive numbers.

Liabilities overstated by $fill in the blank 2, net income and shareholders' equity understated by $fill in the blank 4.
Liabilities by $fill in the blank 6, net income and shareholders' equity by $fill in the blank 8.
Assets by $fill in the blank 10, net income and shareholders' equity by $fill in the blank 12.
Assets by $fill in the blank 14, net income and shareholders' equity by $fill in the blank 16.
Liabilities by $fill in the blank 18, net income and shareholders' equity by $fill in the blank 20.

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