Chapter 4, Problem 17E

Recording Four Adjusting Journal Entries and Preparing an Adjusted Trial Balance

Mint Cleaning Inc. prepared the following unadjusted trial balance at the end of its second year of operations ending December 31.

Account Titles	Debit	Credit
Cash	$ 38
Accounts Receivable	9
Prepaid Insurance	6
Equipment	80
Accumulated Depreciation		$ 0
Accounts Payable		9
Common Stock		76
Retained Earnings		4
Sales Revenue		80
Insurance Expense	0
Salaries and Wages Expense	10
Supplies Expense	26
Totals	$169	$169

Other data not yet recorded at December 31:

1. a. Insurance expired during the year, $5.
2. b. Depreciation expense for the year, $4.
3. c. Salaries and wages payable, $7.
4. d. Income tax expense, $9.

Required:

1. 1. Prepare the adjusting journal entries for the year ended December 31.
2. 2. Using T-accounts, determine the adjusted balances in each account and prepare an adjusted trial balance as of December 31.
3. 3. By what amount would net income have been understated or overstated had the adjusting journal entries not been recorded?

E4-17 Reporting an Income Statement, Statement of Retained Earnings, and Balance Sheet

Refer to 154-16.

Required:

Using t.ne adjusted balances in E4-16, prepare an income statement, statement of retained earnings, and classified balance sheet for the year ended December 31.