1 bock Ask Critical Thinking Problem 5.1 (Algo) The Effect of Adjustments Assume you are the accountant for Catalina Industries. John Catalina, the owner of the company, is in a hurry to receive the financial statements for the year ended December 31, 20X1, and asks you how soon they will be ready. You tell him you have just completed the trial balance and are getting ready to prepare the adjusting entries. Mr. Catalina tells you not to waste time preparing adjusting entries but to complete the worksheet without them and prepare the financial statements based on the data in the trial balance. According to him, the adjusting entries will not make that much difference. The trial balance shows the following account balances: Prepaid rent Supplies Building rences Accumulated depreciation-Building $87,900 38,200 501,000 30,066 If the income statement were prepared using trial balance amounts, the net income would be $192,640. A review of the company's records reveals the following information: 1. Rent of $87,900 was paid on July 1, 20X1, for 12 months. 2. Purchases of supplies during the year totaled $38,200. An inventory of supplies taken at year-end showed supplies on hand of $5,660. 3. The building was purchased three years ago and has an estimated life of 30 years and a salvage value of $50,000. 4. No adjustments have been made to any of the accounts during the year. Indicate the change to net income that results from the adjusting entries. (Round your final answers to whole numbers.) Check points 1 1. Rent of $87,900 was paid on July 1, 20X1, for 12 months 2. Purchases of supplies during the year totaled $38,200. An inventory of supplies taken at year-end showed supplies on hand of $5,660 3. The building was purchased three years ago and has an estimated life of 30 years and a salvage value of $50.000 4. No adjustments have been made to any of the accounts during the year Indicate the change to net income that results from the adjusting entries. (Round your final answers to whole numbers) Description As Amount P Expense of rent for the year $ 87,900 Expense of supplies used during the year 32.540 Depreciation expense for the year 30,006 Total increase in expenses $ 150.506