Question

Crazy Mountain Outfitters Co., an outfitter store for fishing treks, prepared the following unadjusted trial balance at the end of its first year of operations:
Crazy Mountain Outfitters Co.
Unadjusted Trial Balance
April 30, 2019
Debit Balances Credit Balances
Cash 11,400
Accounts Receivable 72,600
Supplies 7,200
Equipment 112,000
Accounts Payable 12,200
Unearned Fees 19,200
John Bridger, Capital 137,800
John Bridger, Drawing 10,000
Fees Earned 305,800
Wages Expense 157,800
Rent Expense 55,000
Utilities Expense 42,000
Miscellaneous Expense 7,000
475,000 475,000
For preparing the adjusting entries, the following data were assembled:
a. Supplies on hand on April 30 were $1,380.
b. Fees earned but unbilled on April 30 were $3,900.
c. Depreciation of equipment was estimated to be $3,000 for the year.
d. Unpaid wages accrued on April 30 were $2,475.
The balance in unearned fees represented the April 1 receipt in advance for services to be provided. Only $14,140 of the services was provided between April 1 and April 30.
Required:
1. Journalize the adjusting entries necessary on April 30. 2019.
2. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters before the adjusting entries.
3. Determine the revenues, expense, and net income of Crazy Mountain Outfitters after the adjusting entries.
4. Determine the effect of the adjusting entries on Retained Earnings.

Answer 1

Answer:

1. Journalize the adjusting entries necessary on April 30. 2019.

Dr Supplies expense 5,820

    Cr Supplies 5,820

Dr Accounts receivable 3,900

    Cr Earned fees 3,900

Dr Depreciation expense 3,000

    Cr Accumulated depreciation 3,000

Dr Wages expense 2,475

    Cr Wages payable 2,475

2. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters before the adjusting entries.

  unadjusted income statement

Fees Earned                      $305,800

Wages Expense               ($157,800 )

Rent Expense                    ($55,000 )

Utilities Expense               ($42,000 )

Miscellaneous Expense      ($7,000)

Net income                         $44,000

3. Determine the revenues, expense, and net income of Crazy Mountain Outfitters after the adjusting entries.

    adjusted income statement

Fees Earned                      $309,700

Wages Expense               ($160,275 )

Rent Expense                    ($55,000 )

Utilities Expense               ($42,000 )

Depreciation expense        ($3,000)

Miscellaneous Expense    ($12,820)

Net income                         $36,605

4. Determine the effect of the adjusting entries on Retained Earnings.

Since net income decreases after the adjusting entries, retained earnings will also decrease. Retained earnings are increased by the amount of net income.