In the first column of the schedule presented below are the condensed financial statements for Melvin Motorvehicle Rentals before adjusting entries were made. The following items were not reflected in the statements.

1. Rental revenue earned but not collected or recorded, $1500.

2. Depreciation on vehicles not recorded, $14 500.

3. Wages earned by employees but not paid at year-end, $5600.

4. The company requires the first-day rental in advance as a deposit for making a reservation. The deposit is either deducted from the total rental charges or is forfeited. During the last week of June, deposits earned were not recorded as revenue, $990.

Required

(a) Prepare the necessary adjusting entries in general journal form.

(b) Determine the effects of the adjustments on the financial statements by completing the schedule presented.

(c) i. Did profit increase or decrease? By how much?
ii. What was the effect of the adjusting entries on total assets? total liabilities? total equity?

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MELVIN MOTORVEHICLE RENTALS Financial Statements Unadjusted Adjusted balances Adjustment balances $255600 Income statement Rental revenue Expenses: Depreciation expense Insurance expense Wages expense General expenses Profit Statement of changes in equity Beginning capital Add: Profit Less: Drawings Ending capital 46 800 140 000 24 000 $ 44 800 90000 44 800 (72000) $ 62800 Balance sheet Cash at bank 46 800 Accounts receivable Other receivables Vehicles Less: Accumulated depreciation 10800 124000 (38 000) $143600 Wages payable Unearned rental revenue Loan payable Melvin Maserati, Capital 7200 73 600 62 800 $143600