Based on the information above, if none of the (6) adjusting journal entries had been recorded, determine the effect on Total Liabilities.

a. overstated by $43,200 b. understated by $48,000 c. understated by $4,800 d. overstated by $38,400

Transcribed image text: USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS: Magic Cleaning Services has a fiscal year end of December 31st. It is in its first year of operations. As of December 31, Magic has the following unadjusted trial balance Credit Debit $430.900 $ 158,000 $ 90,000 $111.000 Account Cash Accounts Receivable Supplies Building Accounts Payable Uneamed Service Revenue Common Stock Retained Earnings Service Revenue Wage Expense Rent Expense Utilities Expense Administrative Expense TOTALS $ 46.100 $ 108,000 $ 100,000 -0- $ 619,200 $ 48,600 $ 12.600 $ 6,200 $ 16,000 $ 873,300 $ 873.300 In addition, Magic has not yet adjusted for the following: 1 The building was purchased on March 1 of the current year. It has a 30-year life, 10% salvage value and Magic uses the straight-line method for depreciation 2. On April 1 Magic prepaid $12,600 for 12 months of rent on a warehouse. The original entry was recorded as Rent Expense 3 By December 31st 40% of the of the services related to the Unearned Revenues had been performed 4 Wages of $4,800 should be accrued and are scheduled to be paid on January 2 5. Supplies of $75.000 were still on hand at year end. 6 Based on industry averages, it is estimated that 2.5% of the accounts receivable will prove to be uncollectible