Question

Supplies were purchased on January 1, 2019; inventory of supplies on January 31, 2019, is $1,200. The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period. Rent of $1,700 expired during the month. Depreciation is computed using the straight-line method. The equipment has an estimated useful life of 10 years with no salvage value.
a. Complete the worksheet for the month.
b. Prepare an income statement, statement of owner’s equity, and balance sheet. No additional investments were made by the owner during the month.
c. Journalize and post the adjusting entries.
d. If the adjusting entries had not been made for the month, would the net income be overstated or understated?

Answer 1

Missing information attached along with the complete worksheet

Answer:

rent expense 1,700 debit

  prepaid rent    1,700 credit

dep expense 350 debit

  acc dep equip      350 credit

advertizing expense 1,400 debit

      prepaid advertizing      1,400 credit

Explanation:

advertizing:

5,600 divide into 4 months = 1400 accrued per month

depreciaton:

42,000 / 10 years = 4,200

then we divide by 12 month: 350