Accounting I

SLO $1-$ Accounting Cycle

Selected entries and account balances at $12/31$ BEFORE adjustment:

A$/$R Supplies Prepaid Insurance

$6,5006/312,2001/14,800$

$10/313,4007/17,200$

Bal. $5,600$ Bal. $12,000$

Accum. Deprec. Wages Payable Equipment

$4,00060080,000$

Fees Earned Supplies Expense Unearned Revenue

$56,80012,000$

Deprec. Expense Insurance Expense Wages Expense

$22,100$

The following information was obtained from the accounting records:

$1.$ An inventory of supplies indicates supplies with a cost of $$1,800$ remain

$2.$ The beginning balance of Prepaid insurance represents a one$-$year policy purchased the previous year.

The July $1$ amount represents the purchase of a one$-$year policy.

$3.$ Of the Unearned Revenue, $40\%$ remained unearned at year$-$end.

$4.$ The Equipment has a ten$-$year life and is depreciated using the straight$-$line method.

$5.$ Salaries are paid every two weeks on Friday $(10$ workdays$).$ The next payroll cycle ends on January $2$nd$.$

Total payroll on that date will be $$3,000.$

$6.$ Services rendered but unbilled at year end amounted to $$3,500.$

Required:

$1.$ Using the information above, prepare the necessary adjusting entries in "Adjusting Entries" tab and post to the T$-$accounts above;

$2.$ Based on the adjusted balances above, prepare the necessary closing entries in "Closing Entries" tab and post to the T$-$accounts above

$3.$ Please answer the following questions:

A$.$ What is the effect on Net Income of making Adjustments $1-6?$

B$.$ If Adjusting entry #$3$ is omitted, which of the following financial statement items will be overstated or understated?

Assets

Liabilities

Stockholder's Equity

Revenue

Expense

Net Income

C$.$ Which accounting principles govern the recognition of revenue and expense in an accounting period?

D$.$ What is the Net Income for the period? What is the balance in Retained Earnings at $12/31?$