Dyer Inc., completed its first year of operations on December 31, 2018. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income statement: Dyer, Inc. Income Statement For the Year Ended December 31 Rent Revenue $ 114.000 Expenses: Salaries and Wages Expense 28.500 Repairs and Maintenance Expense 13.000 Rent Expense 9.000 Utilities Expense 4.000 Travel Expense 3.000 Total Expenses 57.500 Net Income S. 56.500 You are an independent CPA hired by the company to audit the firm's accounting systems and financial statements. In your audit, you developed additional data as follows: a) Wages for the last three days of December amounting to $310 were not recorded or paid. b) The $400 telephone bill for December 2018 has not been recorded or paid. c) Depreciation of equipment amounting to $23,000 for 2018 was not recorded. d) Interest of $500 was not recorded on the notes payable by Dyer, Inc. e) The Rental Revenue account includes $4,000 of revenue to be earned in January 2019. f) Supplies costing $600 were used during 2018, but this has not yet been recorded. 8) The income tax expense for 2018 is $7,000, but it won't actually be paid until 2019. 1. What adjusting journal entry for each item should be recorded at December 31, 2018? If none is required, explain why. (a) 400 (b) Utilities Expense (+E, SE) Accounts Payable 400 Ic 500 (d) Interest Expense (+E, -SE) Interest Payable sod (e) 600 10 Supplies Expense (+E.-SE). Supplies (-A) 600 2. For each of the adjusting items, indicate the amount and the direction of effects of the adjusting journal entry on the elements of the balance sheet and income statement. Complete the following table by entering the amount and the direction (negative for decrease) or write "-" for no effect. Balance Sheet Total Stockholders Liabilities Equity 310 -310 Income Statement Net Revenues Expenses Income 310 -310 Transaction Total Assets B -23.000 D E F G -23.000 23,000 -23.000 4,000 -4,000 -4,000 -4.000 3. Prepare, in proper form, an adjusted income statement for 2018. Dyer, Inc. Income Statement For the Year Ended December 31, 2018 Rent Revenue Expenses: Salaries and Wages Expense Depreciation Expense Repairs and Maintenance Expense Rent Expense Utilities Expense Travel Expense 13,000 9,000 3,000 Total Expenses Net Income 4. Did the adjustments have a significant overall effect on the company's net income? By what dollar amount did net income change as a result of the adjustments? Net Income Before Net Income After II Net Income Adjustments
