Financial Statement Effects of Adjusting Entries

When adjusting entries were made at the end of the year, the accountant for Parker Company did not make the following adjustments.

Required:

Identify the effect on the financial statements of the adjusting entries that were omitted.

a. $2,900 of wages had been earned by employees but were unpaid. SelectThe error will overstate revenues and understate liabilities.This error will understate expenses and understate liabilities.The error will overstate expenses and understate liabilities.Item 1

b. $3,750 of revenue had been earned but was uncollected and unrecorded. SelectThe error will overstate revenues and understate liabilities.This error will understate revenues and understate assets.The error will overstate expenses and understate liabilities.Item 2

c. $2,400 of revenue had been earned. The customer had prepaid for this service and the amount was originally recorded in the Unearned Sales Revenue account. SelectThe error will overstate revenues and understate liabilities.This error will understate revenues and overstate liabilities.The error will overstate expenses and understate liabilities.Item 3

d. $1,200 of insurance coverage had expired. Insurance had been initially recorded in the Prepaid Insurance account. SelectThe error will overstate revenues and understate liabilities.This error will understate expenses and overstate assets.The error will overstate expenses and understate liabilities.Item 4