Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Critical Thinking Problem 5.1 (Static) The Effect of Adjustments Assume you are the accountant for Catalina Industries, John Catalina, the owner of the company, is

image text in transcribed

Critical Thinking Problem 5.1 (Static) The Effect of Adjustments Assume you are the accountant for Catalina Industries, John Catalina, the owner of the company, is in a hurry to receive the financial statements for the year ended December 31, 20X1, and asks you how soon they will be ready. You tell him you have just completed the trial balance and are getting ready to prepare the adjusting entries. Mr. Catalina tells you not to waste time preparing adjusting entries but to complete the worksheet without them and prepare the financial statements based on the data in the trial balance. According to him, the adjusting entries will not make that much difference. The trial balance shows the following account balances: Prepaid rent Supplies Building Accumulated depreciation-Building $ 84,000 36, een 478,000 28,000 If the income statement were prepared using trial balance amounts, the net income would be $191,120. A review of the company's records reveals the following Information: 1. Rent of $84.000 was paid on July 1, 20x1, for 12 months 2. Purchases of supplies during the year totaled $36,000. An Inventory of supplies taken at year-end showed supplies on hand of $5,440. 3. The building was purchased three years ago and has an estimated life of 30 years and a salvage value of $50,000. 4. No adjustments have been made to any of the accounts during the year. Indicate the change to net income that results from the adjusting entries

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

IT And European Bank Performance

Authors: E. Beccalli

1st Edition

0230006949, 9780230006942

More Books

Students also viewed these Accounting questions