Paula Judge owns Judge Creative Designs. The trial balance of the firm for January 31, 2019, the first month of operations, is shown below.

INSTRUCTIONS

Complete the worksheet for the month.

Prepare an income statement, statement of owner's equity, and balance sheet. No additional investments were made by the owner during the month.

Journalize and post the adjusting entries. Use 3 for the journal page number. Use the following account numbers: Supplies, 121; Prepaid Advertising, 130; Prepaid Rent, 131; Accumulated

Depreciation-Equipment, 142; Supplies Expense, 517; Advertising Expense, 519; Rent Expense, 520; Depreciation Expense, 523.

End-of-the-month adjustments must account for the following items:

a. Supplies were purchased on January 1, 2019; inventory of supplies on January 31, 2019, is $1,600.

b. The prepaid advertising contract was signed on January 1, 2019, and covers a four-month period.

c. Rent of $2,100 expired during the month.
d. Depreciation is computed using the straight-line method. The equipment has an estimated useful life of 10 years with no salvage value.
Analyze: If the adjusting entries had not been made for the month, would net income be overstated or understated?

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Cantu Corporation Worksheet Month Ended December 31,2019 TRIAL BALANCE ACCOUNT NAME DEBIT CREDIT 39 Accounts Receivable (a) 3500 00 171010100 Prepaid Advertising 2 850 00 6 500 54 5 00 Selena Cantu, Capital 577| 50 3500 00 (b) 1700 00 850 00 11 Supplies Expense Depreciation Expense-tquipment 14 Salaries Expense 15 Utilities Expense 118 7 5 000 1187 50 Judge Creatlve Designs Worksheet (Partial) Month Ended January 31, 2019 TRIAL BALANCE ACCOUNT NAME CREDIT 165 5000 61 00000 8 00000 74 100 00 070000 900 00 6 151 65 00 ADJUSTED TRIAL BALANCE NCOME STATEMENT 39 42 54 54 50 57 19 600 00 57 750 16350100 41 57 61 850 41 03 25 57 103