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, 20Y5

Debit Balances Credit Balances
Cash 12,110
Accounts Receivable 80,410
Supplies 19,380
Equipment 407,380
Accounts Payable 18,890
Unearned Fees 21,310
Common Stock 55,000
Retained Earnings 225,000
Dividends 15,990
Fees Earned 484,400
Wages Expense 112,380
Rent Expense 85,740
Utilities Expense 61,520
Miscellaneous Expense 9,690
804,600 804,600

For preparing the adjusting entries, the following data were assembled:
Required:

Supplies on hand on April 30 were $7,160.
Fees earned but unbilled on April 30 were $8,770.
Depreciation of equipment was estimated to be $12,110 for the year.
Unpaid wages accrued on April 30 were $1,550.
The balance in unearned fees represented the April 1 receipt in advance for services to be provided. Only $16,830 of the services was provided between April 1 and April 30.

a. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. before the adjusting entries.
b. Determine the revenues, expenses, and net income of Crazy Mountain Outfitters Co. after the adjusting entries.
c. Determine the effect of the adjusting entries on Retained Earnings.

Answer 1

Answer:

Crazy Mountain Outfitters Co.

a. Income Statement before Adjusting Entries:

Fees Earned                                   484,400

Wages Expense            112,380

Rent Expense                85,740

Utilities Expense            61,520

Miscellaneous Expense 9,690     269,330

Net Income                                     215,070

b. Income Statement after adjustments:

Fees Earned                                  510,000

Wages Expense            113,930

Rent Expense                85,740

Utilities Expense            61,520

Supplies Expense          12,220

Depreciation expense    12,110

Miscellaneous Expense 9,690     295,210

Net Income                                    214,790

c. The effect of the adjusting entries on Retained Earnings:

Retained earnings per unadjusted trial balance    $225,000

Net income after adjusting entries                             214,790

Ending Retained earnings after adjusting entries  $439,790

Ending Retained earnings before adjusting entries 440,070 (225,000 + 215,070)

Difference in the Retained earnings = $280

Explanation:

a) Data and Calculations:

Crazy Mountain Outfitters Co.

Unadjusted Trial Balance April 30, 20Y5

                                             Debit       Credit

Cash                                    12,110

Accounts Receivable        80,410

Supplies                            19,380

Equipment                     407,380

Accounts Payable                               18,890

Unearned Fees                                   21,310

Common Stock                                 55,000

Retained Earnings                          225,000

Dividends                        15,990

Fees Earned                                   484,400

Wages Expense            112,380

Rent Expense                85,740

Utilities Expense            61,520

Miscellaneous Expense 9,690

Totals                          804,600    804,600

b) Analysis:

1. Supplies Expense $12,220 Supplies $12,220 ($19,380 - $7,160)

2. Accounts receivable $8,770 Fees earned $8,770

3. Depreciation expense $12,110 Accumulated Depreciation $12,110

4. Wages Expense $1,550 Wages Payable $1,550

5. Unearned Fees $16,830 Fees earned $16,830

After Adjusting Entries:

Fees Earned = 510,000 (484,400 + 8,770 + 16,830)  

Wages Expense = 113,930 (112,380 + 1,550)

Rent Expense                85,740

Utilities Expense            61,520

Supplies Expense          12,220 (0 + 12,220)

Depreciation expense    12,110 (0 + 12,110)

Miscellaneous Expense 9,690     295,210