1. Prepare the adjusting journal entries for the year ended December 31. 2. Using T-accounts, determine the adjusted balances in each account and prepare an adjusted trial balance as of December 31. 3. By what amount would net income have been understated or overstated had the adjusting journal entries not been recorded? E4-17 Reporting an Income Statement, Statement of Retained Earnings, and Balance Sheet Refer to E4-16. Required: Using the adjusted balances in E4-16, prepare an income statement, statement of retained earnings, and classified balance sheet for the year ended December 31. E4-18 Recording Closing Entries Refer to E4-16. Required: Using the adjusted balances in E4-16, give the closing journal entry for the year ended December 31. E4-19 Preparing Adjusting Entries, an Adjusted Trial Balance, and Financial Statements Daily Driver, Inc. (DDI), operates a driving service through a popular ride-sharing app. DDI has prepared a list of unadjusted account balances at its December 31 year-end. You have reviewed the balances and made notes shown in the right column. LO 4-4 Account Titles Debit Credit Cash $ 38 Accounts Receivable 9 Prepaid Insurance 6 Equipment 80 Accumulated Depreciation $ 0 Accounts Payable Salaries and Wages Payable Income Tax Payable 9 0 0 Common Stock 76 Retained Earnings 4 Sales Revenue 80 Insurance Expense 0 Salaries and Wages Expense 10 Supplies Expense 26 Income Tax Expense 0 Totals $169 $169 Other data not yet recorded at December 31: a. Insurance expired during the year, $5. b. Depreciation expense for the year, $4. c. Salaries and wages payable, $7. d. Income tax expense, $9. Required: 1. Prepare the adjusting journal entries for the year ended December 31. 2. Using T-accounts, determine the adjusted balances in each account and prepare an adjusted trial balance as of December 31. 3. By what amount would net income have been understated or overstated had the adjusting journal entries not been recorded? E4-17 Reporting an Income Statement, Statement of Retained Earnings, and Balance Sheet Refer to E4-16. DAILY DRIVER, INC. Unadjusted Trial Balance At December 31 Account Name Cash Supplies Prepaid Insurance Equipment Debit Credit Notes $ 1,000 50 1,200 40,000 This equals the bank balance. Only windshield washer fluid that cost $30 remains at December 31. This amount was paid January 2 for car insurance from January 1 through December 31 of this year. This is the car's purchase price. Accumulated Depreciation Salaries and Wages Payable $ 2,400 The car will be two years old at the end of December. 0 DDI has not yet paid or recorded $800 of salary for December. Income Tax Payable 0 DDI paid all its taxes from last year. Common Stock 25,000 DDI issued 5,000 shares at $5 each. Retained Earnings Service Revenue 5,430 19,570 This is the total accumulated earnings to January 1 of this year. Salaries and Wages Expense 8,800 Supplies Expense 100 All revenue is received in cash when the service is given. DDI's only employee receives a monthly salary of $800 to December 31. This is the cost of windshield washer fluid used to November 30. Depreciation Expense 0 The car's benefits are being used up about $2,400 per year. Insurance Expense 0 Fuel Expense 1,250 Income Tax Expense 0 No car insurance has been paid for next year. All fuel is paid for in cash. DDI's tax rate is 20 percent of income before tax. Totals $ 52,400 $ 52,400 Required: 1. Use the notes to determine and record adjusting entries needed on December 31 for (a) sup- plies used up, (b) insurance costs, (c) using up the car's benefits, (d) salaries not yet accounted for, and (e) income taxes for the year. 2. Post the adjusting entries from requirement 1 to T-accounts to determine new adjusted balances, and prepare an adjusted trial balance. (If you are completing this exercise using the general ledger tool in Connect, this requirement will be completed automatically for you.) 3. Using the adjusted balances from requirement 2, prepare an income statement, statement of retained earnings, and classified balance sheet. E4-20 Preparing Adjusting Entries, an Adjusted Trial Balance, and Financial Statements Bill's Boards (BB) is an outdoor advertising company founded by William Longfall. William knows very little accounting so he hired a friend to "keep the books." Unfortunately, William did not review his friend's work and now it seems his friend has made a mess of the accounting records. William has provided you the following list of unadjusted account balances at BB's September 30 fiscal year-end. You have reviewed the balances with William and made notes shown in the right column. LO 4-1, 4-2, 4-3, 4-4 LEVEL UP