Angela Mosley owns Innovation Design. The trial balance of the firm for January $31,20$x $20$x$1,$ the month of operations is shown below

E

nd$-$of$-$the$-$month adjustments must account for the following items:

points

a$.$Supplies were purchased on January $1,20$X$1$; inventory of supplies on January $31,20$X$1,$ is $$1,000.$

b$.$The prepaid advertising contract was signed on January $1,20$X$1,$ and covers a four$-$month period.

c$.$Rent of $$1,500$ expired during the month.

d$.$ Depreciation is computed using the straight$-$line method. The equipment has an estimated useful life of $10$ years with no salvage value.

Required:

$1.$ Complete the worksheet for the month.

$2.$ Prepare an income statement, statement of owner's equity, and balance sheet. No additional investments were made by the owner during the month. $|$

$3.$ Journalize and post the adjusting entries.

Analyze

If the adjusting entries had not been made for the month, by what amount would net income be overstated or understated?