Harrison Fishing Charters has collected the following data for the December 31 adjusting entries:

a. The company received its electric bill on December 31 for $375 but will not pay it until January 5. (Use the Utilities Payable account.)

b. Harrison purchased a three-month boat insurance policy on November 1 for $3,600. Harrison recorded a debit to Prepaid Insurance.

c. As of December 31, Harrison had earned $1,000 of charter revenue that has not been recorded or received.

d. Harrison's fishing boat was purchased on January 1 at a cost of $56,500. Harrison expects to use the boat for five years and that it will have a residual value of $6,500. Determine annual depreciation assuming the straight-line depreciation method is used.

e. On October 1, Harrison received $5,000 prepayment for a deep-sea fishing charter to take place in December. As of December 31, Harrison has completed the charter.

Requirements

1. Journalize the adjusting entries needed on December 31 for Harrison Fishing Charters. Assume Harrison records adjusting entries only at the end of the year.

2. If Harrison had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide:

Transcribed Image Text:

Specific Category of Accounts on the Specific Category Adjusting of Accounts on the Income Statement Over / Understated Over / Understated Balance Sheet Entry