Accounting I

The following information was obtained from the accounting records: 1. An inventory of supplies indicates supplies with a cost of $1,800 remain 2. ThebeginningbalanceofPrepaidinsurancerepresentsaone-yearpolicypurchasedthepreviousyear.

The July 1 amount represents the purchase of a one-year policy. 3. Of the Unearned Revenue, 40% remained unearned at year-end. 4. TheEquipmenthasaten-yearlifeandisdepreciatedusingthestraight-linemethod. 5. Salaries are paid every two weeks on Friday (10 workdays). The next payroll cycle ends on January 2nd.

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?

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