On December 31, 2017, Dyer Inc. completed its first year of operations. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income statement: 

You are an independent CPA hired by the company to audit the firm’s accounting systems and financial statements. In your audit, you developed additional data as follows: 

a. Wages for the last three days of December amounting to $310 were not recorded or paid. 

b. The $400 telephone bill for December 2017 has not been recorded or paid. 

c. Depreciation on rental autos, amounting to $23,000 for 2017, was not recorded. 

d. Interest of $500 was not recorded on the note payable by Dyer Inc. 

e. The Rental Revenue account includes $4,000 of revenue to be earned in January 2018. 

f. Maintenance supplies costing $600 were used during 2017, but this has not yet been recorded. 

g. The income tax expense for 2017 is $7,000, but it won’t actually be paid until 2018. 

Required: 

1. What adjusting journal entry for each item (a) through (g) should be recorded at December 31, 2017? If none is required, explain why. 

2. Prepare, in proper form, an adjusted income statement for 2017. 

3. Did the adjustments have a significant overall effect on the company’s net income?

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Income Statement, 2017 Rental Revenue $114,000 Expenses: Salaries and Wages Expense $28,500 Maintenance Expense 12,000 Rent Expense 9,000 Utilities Expense 4,000 Gas and Oil Expense 3,000 Other Expenses Total Expenses 1,000 57,500 Income $ 56,500