Buena Vista Social Club accumulates the following adjustment data at December 31.

1. Revenue of $5,000 collected in advance has been earned.

2. Salaries of $1,000 are unpaid.

3. Prepaid rent totaling $500 has expired.

4. Supplies of $450 have been used.

5. Revenue earned but unbilled total $1,000.

6. Utility expenses of $600 are unpaid.

7. InterestExpense of $300 has accrued on a note payable.

Instructions

1. For each of the above items indicate:

1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
2. The account relationship (asset/liability, liability/revenue, etc.).
3. The status of account balances before adjustment (understatement or overstatement).

4. The adjusting entry.

2. Assume net income before the adjustments listed above was $15,500. What is the adjusted net income?

Prepare your answer in the tabular form presented below and explain adjustments.

Before Adjustment

Type of Account (Understatement

Adjustment Relationship or Overstatement) Adjusting Entry

Codes: A = Asset R = Revenue

L = Liability O = Overstatement

E = Expense U = Understatement

Use these codes for simplicity

2. Net income before adjustments........................................................ $15,500

Add: Unearned revenue (1)...........................................................

Accrued revenue (5)..............................................................

Less: Accrued salaries (2)...............................................................

Prepaid rent expired (3)........................................................

Supplies used (4)...................................................................

Accrued utilities (6)...............................................................

Accrued interest (7)...............................................................

Adjusted net income.........................................................................