On December 31, 2021, Alan and Company prepared an income statement and balance sheet but failed to take into account four adjusting journal entries. The income statement, prepared on this incorrect basis, reported income before income tax of $30,000. The balance sheet (before the effect of income taxes) reflected total assets, $90,000; total liabilities, $40,000; and stockholders' equity, $50,000. The data for the four adjusting journal entries follow: a. Amortization of $8,000 for the year on software was not recorded. b. Salaries and Wages amounting to $17,000 for the last three days of December 2021 were not paid and not recorded (the next payroll will be on January 10, 2022). c. Rent revenue of $4,800 was collected on December 1, 2021, for office space for the three-month period December 1, 2021, to February 28, 2022. The $4,800 was credited in full to Deferred Revenue when collected. d. Income taxes were not recorded and not paid. The income tax rate for the company is 30%. Required: Complete the following table to show the effects of the four adjusting journal entries. (Negative amounts should be indicated by a minus sign.) Items Amounts reported a Effect of amortization b. Effect of salaries and wages c. Effect of rent revenue Adjusted balances d. Effect of income tax Correct amounts $ Net Income 30,000 $ 6,600 Total Assets Total Liabilities 90,000 $ 82,000 Stockholders' Equity 50.000 40,000 $ 55,400 26,600
On December 31, 2021, Alan and Company prepared an income statement and balance sheet but failed to take into account four adjusting journal entries. The income statement, prepared on this incorrect basis, reported income before income tax of $30,000. The balance sheet (before the effect of income taxes) reflected total assets, $90,000; total liabilities, $40,000; and stockholders' equity, $50,000. The data for the four adjusting journal entries follow: a. Amortization of $8,000 for the year on software was not recorded. b. Salaries and Wages amounting to $17,000 for the last three days of December 2021 were not paid and not recorded (the next payroll will be on January 10, 2022). c. Rent revenue of $4,800 was collected on December 1, 2021, for office space for the three-month period December 1, 2021, to February 28, 2022. The $4,800 was credited in full to Deferred Revenue when collected. d. Income taxes were not recorded and not paid. The income tax rate for the company is 30%. Required: Complete the following table to show the effects of the four adjusting journal entries. (Negative amounts should be indicated by a minus sign.) Items Amounts reported a Effect of amortization b. Effect of salaries and wages c. Effect of rent revenue Adjusted balances d. Effect of income tax Correct amounts $ Net Income 30,000 $ 6,600 Total Assets Total Liabilities 90,000 $ 82,000 Stockholders' Equity 50.000 40,000 $ 55,400 26,600
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On December 31, 2021, Alan and Company prepared an income statement and balance sheet but failed to take into account four
adjusting journal entries. The income statement, prepared on this incorrect basis, reported income before income tax of $30,000. The
balance sheet (before the effect of income taxes) reflected total assets, $90,000; total liabilities, $40,000; and stockholders' equity,
$50,000. The data for the four adjusting journal entries follow:
a. Amortization of $8,000 for the year on software was not recorded.
b. Salaries and Wages amounting to $17,000 for the last three days of December 2021 were not paid and not recorded (the next
payroll will be on January 10, 2022).
c. Rent revenue of $4,800 was collected on December 1, 2021, for office space for the three-month period December 1, 2021, to
February 28, 2022. The $4,800 was credited in full to Deferred Revenue when collected.
d. Income taxes were not recorded and not paid. The income tax rate for the company is 30%.
Required:
Complete the following table to show the effects of the four adjusting journal entries. (Negative amounts should be indicated by a
minus sign.)
Items
Amounts reported
a. Effect of amortization
b. Effect of salaries and wages
c. Effect of rent revenue
Adjusted balances
d. Effect of income tax
Correct amounts
$
Net Income
30,000 $
6,600
Total Assets
90,000 $
82,000
Total Liabilities
Stockholders' Equity
50,000
40,000 $
55,400
26,600
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