Assume you are the accountant for Thompson Industries. Robert Thompson, the owner of the company, is in a hurry to receive the financial statements for the year ended December 31, 2013, and asks you how soon they will be ready. You tell him you have just completed the trial balance and are getting ready to prepare the adjusting entries. Mr. Thompson tells you not to waste time preparing adjusting entries but to complete the worksheet without them and prepare the financial statements based on the data in the trial balance. According to him, the adjusting entries will not make that much difference. The trial balance shows the following account balances:
Prepaid Rent ................................$ 42,000
Supplies ...........................................18,000
Building ......................................420,000
Accumulated Depreciation-Building ....33,600
If the income statement were prepared using trial balance amounts, the net income would be $165,500.
A review of the company's records reveals the following information:
1. Rent of $42,000 was paid on July 1, 2013, for 12 months.
2. Purchases of supplies during the year totaled $ 18,000. An inventory of supplies taken at year- end showed supplies on hand of $3,500.
3. The building was purchased three years ago and has an estimated life of 25 years.
4. No adjustments have been made to any of the accounts during the year.
Write a memo to Mr. Thompson explaining the effect on the financial statements of omitting the adjustments. Indicate the change to net income that results from the adjusting entries.

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ADJUSTED TRIAL BALANCE DEBIT INCOME STATEMENT BALANCE SHEET CREDIT DEBIT CREDIT DEBIT CREDIT 33 9 00 00 4 4 0 0 00 18 00 00 640 0 00 36 00000 33 9 00 00 44 0 00o 18 0000 6 4 00 00 36 000 00 6 0000 15 0 00 00 60 0 0 000 6 0 0006 15 00 0007 60 0 0 0 008 6 00 0 00 6 0 0000 6266 0 00 62 6 6 0 00 10 16 0000 60 0 0 71000100' 37 2 00 00 12 00 00 2 1 6 0 00 1 6 0 0 00 6 0 0 00 000 o 37 2 0 000 1 20 0 00 12 15 216 0 00 138 2 6 0 00 1382 6 0 00 -497-00ーー2 660 00ㅡㅡ ーー75 600 00 17 12 9 0 0 00 18 88 50 0 00 - 12 9 00 00 62 16 60100 500 62 6 6 0 00 88 5 0 0 00 19 20