Adjustments: The Matching Concept at Work Faulty Corporation reported net income of $350,000 for the year, but failed to take into consideration four adjustments the assistant bookkeeper thought should be included:

1. Equipment with an expected economic life of five years was purchased on January | for $180,000. No depreciation was recorded for the period.

. A three-year insurance policy was purchased on January | for $30,000. The full amount is reported as prepaid insurance at December 31.

3. Repair work costing $26,000 was done on Faulty’s computer equipment in early December, but no expense was recorded because the bill has not been paid.

4. Faulty Corporation provided professional services for customers in the amount of $85,000 in late December, but nothing has been recorded because the bills will not be sent out until the second week of January.

a. For each of the above, determine which accounts should be adjusted and the amount of the adjustment.

b. Determine the effect of the required adjustments on total assets and total liabilities reported at the end of the year and reported net income for the year.