6th Edition

ISBN: 9781265554927

Author: PHILLIPS

Publisher: MCG

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Textbook Question

Chapter 4, Problem 13E

Analyzing the Effects of Adjusting Journal Entries on the Income Statement and Balance Sheet

On December 31, 2018, 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 2018 were not paid and not recorded (the next payroll will be on January 10, 2019).
c. Rent revenue of $4,800 was collected on December 1, 2018, for office space for the three-month period December 1, 2018, to February 28, 2019. 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 (indicate deductions with parentheses):

Chapter 4, Problem 13E, Analyzing the Effects of Adjusting Journal Entries on the Income Statement and Balance Sheet On

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 4, Problem 12E

Chapter 4, Problem 14E

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Chapter 4 Solutions

FUNDAMENTALS OF FINANCIAL ACCOUNTING LL

Ch. 4 - Prob. 1Q Ch. 4 - Explain the relationships between adjustments and...Ch. 4 - Prob. 3Q Ch. 4 - Prob. 4Q Ch. 4 - What is a contra-asset? Give an example of one.Ch. 4 - Explain the differences between depreciation...Ch. 4 - What is an adjusted trial balance? What is its...Ch. 4 - On December 31, a company makes a 59,000 payment...Ch. 4 - Using the information in question 8, determine the...Ch. 4 - Using the information in question 8, prepare the...

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Solution Summary: The author explains the effects of the four adjusting journal entries to update the income statement accounts and balance sheet accounts according to accrual basis principle.

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