Answer:
Atlantic Coast Realty
1. Adjusting Journal Entries:
Debit 12 Accounts Receivable $10,250
Credit 41 Fees Earned $10,250
To record the unbilled fees at July 31.
Debit 55 Supplies Expense $2,250
Credit 13 Supplies $2,250
To record supplies used during the period.
Debit 53 Rent Expense $5,800
Credit 14 Prepaid Rent $5,800
To record expired rent.
Debit 57 Depreciation Expense $8,750
Credit 17 Accumulated Depreciation-Equipment $8,750
To record depreciation expense for the year.
Debit 41 Fees Earned $2,100
Credit 22 Unearned Fees $2,100
To record unearned fees.
Debit 54 Wages Expense $4,900
Credit 23 Wages Payable $4,900
To record accrued wages.
2. The effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year:
Income will be understated by $10,250.
Income will be overstated by $4,900.
3. The effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year:
Income will be understated by $10,250.
Income will be overstated by $4,900.
4. The effect on the "Net increase or decrease in cash" on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year:
a. Net increase in cash will be less by $4,900 (if the indirect method is used).
b. Net decrease in cash will be more by $10,250 (if the indirect method is used).
Explanation:
a) Data and Calculations:
Unadjusted account balances at July 31:
Debits Credits
Accounts Receivable $ 79,500
Prepaid Rent 9,300
Supplies 3,180
Equipment 342,700
Accumulated Depreciation—Equipment $102,700
Wages Payable –Unearned Fees 14,100
Fees Earned 670,200
Wages Expense 329,600
Rent Expense –
Depreciation Expense –
Supplies Expense –
Analysis of Adjustments:
12 Accounts Receivable $10,250 41 Fees Earned $10,250
55 Supplies Expense $930 13 Supplies $2,250
53 Rent Expense $5,800 14 Prepaid Rent $5,800
57 Depreciation Expense $8,750 17 Accumulated Depreciation-Equipment $8,750
41 Fees Earned $2,100 22 Unearned Fees $2,100
54 Wages Expense $4,900 23 Wages Payable $4,900
CHART OF ACCOUNTS
Atlantic Coast Realty
General Ledger
ASSETS
11 Cash
12 Accounts Receivable
13 Supplies
14 Prepaid Rent
15 Land
16 Equipment
17 Accumulated Depreciation-Equipment
LIABILITIES
21 Accounts Payable
22 Unearned Fees
23 Wages Payable
24 Taxes Payable
EQUITY
31 Owner’s Equity
32 Withdrawals
REVENUE
41 Fees Earned
42 Rent Revenue
EXPENSES
51 Advertising Expense
52 Insurance Expense
53 Rent Expense
54 Wages Expense
55 Supplies Expense
56 Utilities Expense
57 Depreciation Expense
59 Miscellaneous Expense
