Answered Essay: Adjusting entries and errors

Adjusting entries and errors

At the end of August, the first month of operations, the following selected data were taken from the financial statements of Tucker Jacobs, an attorney:

Net income for August $112,500
Total assets at August 31 650,000
Total liabilities at August 31 225,000
Total stockholders’ equity at August 31 425,000

In preparing the financial statements, adjustments for the following data were overlooked:

1. Unbilled fees earned at August 31, $31,900.

2. Depreciation of equipment for August, $7,500.

3. Accrued wages at August 31, $5,200.

4. Supplies used during August, $3,000.

Instructions

1. Journalize the entries to record the omitted adjustments.

2. Determine the correct amount of net income for August and the total assets, liabilities, and stockholders’ equity at August 31. In addition to indicating the corrected amounts, indicate the effect of each omitted adjustment by setting up and completing a columnar table similar to the following. Adjustment (a) is presented as an example.

Net Income Total Assets = Total Liabilities + Total Stockholders’ Equity
Reported amounts $112,500 $650,000 $225,000 $425,000
Corrections:
Adjustment (a) +31,900 +31,900 0 +31,900
Adjustment (b) ____ ____ ____ ____
Adjustment (c) ____ ____ ____ ____
Adjustment (d) ____ ____ ____ ____
Corrected amounts ____ ____ ____ ____

Expert Answer

 

Date Accounts Title Dr Cr
31-Aug Accounst Receivable $31,900
Fees revenue $31,900
31-Aug Depreciation expenses $7,500
Accumulated Depreciation-Equipment $7,500
31-Aug Wages expenses $5,200
Wages payable $5,200
31-Aug Supplies expenses $3,000
Supplies $3,000
Net Income Total Assets = Total Liabilities + Total Stockholders’ Equity
Reported amounts $112,500 $650,000 $225,000 $425,000
Corrections:
Adjustment (a) 31,900 31,900 0 31,900
Adjustment (b) -7500 -7500 0 -7500
Adjustment (c) -5200 0 5200 -5200
Adjustment (d) -3000 -3000 0 -3000
Corrected amounts $128,700 $671,400 $230,200 $441,200
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