Exercise 2 On September 1, Northhampton Industries signed a six-month lease for office space, which is effective September 1. Northhampton agreed to prepay the rent and mailed a check for $12,000 to the landlord on September 1. Assume that Northhampton prepares adjusting entries only four times a year, on March 31, June 30, September 30, and December 31. 1. Compute the rental cost for each full month. 2. Prepare the journal entry to record the payment of rent on September 1. 3. Prepare the adjusting entry on September 30. 4. Assume that the accountant prepares the adjusting entry on September 30 but forgets to record an adjusting entry on December 31. Will net income for the year be understated or overstated? by what amount? Exercise 1 Somerville Corp purchases office supplies once a month and prepares monthly financial statements The asset account Office Supplies on Hand has a balance of $1,450 on May 1. Purchases of supplies during May amount to $1,100. Supplies on hand at May 31 amount to $920. Prepare the necessary adjusting entry on Somerville's books on May 31. What will be the effect on net income for May if this entry is not recorded? Exercise 1 Somerville Corp. purchases office supplies once a month and prepares monthly financial statements. The asset account Office Supplies on Hand has a balance of $1.450 on May 1. Purchases of supplies during May amount to $1,100. Supplies on hand at May 31 amount to $920. Prepare the necessary adjusting entry on Somerville's books on May 31. What will be the effect on net income for May if this entry is not recorded? |