Question

For the year ending August 31, Solstice Medical Co. mistakenly omitted adjusting entries for (1) depreciation of $8,400, (2) fees earned that were not billed of $64,400, and (3) accrued wages of $10,600. Indicate the effect of the errors on (a) revenues, (b) expenses, and (c) net income for the year ended August 31.

Answer 1

Answer:

Solstice Medical Co.

For the year ended August 31:

Effects of Omissions on  (a) revenues   (b) expenses    (c) net income

(1) depreciation of                                           $8,400             ($8,400)          

(2) fees earned not billed    $64,400                                      64,400

(3) accrued wages of                                   $10,600              (10,600)

Net   effect                         +$64,400        +$19,000          +$45,400

Explanation:

a) Data and Analysis of Omitted Adjusting Entries:

(1) depreciation of $8,400: increase expenses and reduce net income

(2) fees earned that were not billed of $64,400: increase revenue and net income

(3) accrued wages of $10,600: increase expenses and reduce net income