Karla Tanner opened a web consulting business called Linkworks and recorded the following transactions in its first month of operations. Apr. 1 Tanner invests $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock. Apr. 2 The company prepaid $9,000 cash for twelve months' rent for office space. The company's policy is record prepaid expenses in balance sheet accounts. Apr. 3 The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days. Apr. 6 The company completed services for a client and immediately received $4,000 cash. Apr. 9 The company completed a $6,000 project for a client, who must pay within 30 days. Apr. 13 The company paid $11,600 cash to settle the account payable created on April 3. Apr. 19 The company paid $2,400 cash for the premium on a 12-month insurance policy. The company's policy is record prepaid expenses in balance sheet accounts. Apr. 22 The company received $4,400 cash as partial payment for the work completed on April 9. Apr. 25 The company completed work for another client for $2,890 on credit. Apr. 28 The company paid $5,500 cash in dividends. Apr. 29 The company purchased $600 of additional office supplies on credit. Apr. 30 The company paid $435 cash for this month's utility bill. Descriptions of items that require adjusting entries on April 30, 2017, follow. a) On April 2, the company prepaid $9,000 cash for twelve months' rent for office space b) The balance in Prepaid insurance represents the premium paid for a 12-month insurance policy the policy's coverage began on April 1 c) Office supplies on hand as of April 30 total $1,200. d) Straight-line depreciation of office equipment, based on a 5-year life and a $4,000 salvage value, is $500 per month. e) The company has completed work for a client, but has not yet billed the $1,800 fee. f) Wages due to employees, but not yet paid, as of April 30 total $2,600. View transaction list View journal entry worksheet Account Title Credit No 21 Date Apr 30 Debit 750 Rent expense Prepaid rent 2 Apr 30 3,600 Office supplies expense Office supplies 3,600 3 Apr 30 200 Insurance expense Prepaid insurance 200 Apr 30 500 Depreciation expense - Office equipment Accumulated depreciation - Office equipment 5 Apr 30 1,800 Accounts receivable Services revenue 1,800 Apr 30 2,600 Wages expense Wages payable 2,600 Adjusted LINKWORKS Trial Balance April 30, 2017 Credit Debit 59,465 6,290 600 2,200 8,250 34,000 Account Title *Cash * Accounts receivable * Office supplies * Prepaid insurance Prepaid rent Office equipment Accumulated depreciation - Office equipment * Accounts payable Wages payable Common stock Dividends Services revenue * Rent expense * Insurance expense Office supplies expense Wages expense *Depreciation expense - Office equipment *Utilities expense Total 500 600 2,600 106,000 5,500 14,690 750 200 3,600 2,600 500 435 124,390 $ $ 124,390 Adjusted - LINKWORKS Trial Balance April 30, 2017 Credit Debit 59,465 6,290 600 2,200 8,250 34,000 500 Account Title Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent Office equipment Accumulated depreciation - Office equipment Accounts payable Wages payable Common stock Dividends Services revenue Rent expense Insurance expense Office supplies expense Wages expense Depreciation expense - Office equipment Utilities expense Total 600 2,600 106,000 5,500 14,690 750 200 3,600 2,600 500 435 124,390 $ $ 124,390 Adjusted LINKWORKS Income Statement For Month Ended April 30, 2017 Revenues: Services revenue $ 14,690 $ 14,690 Total revenues Expenses: Utilities expense Rent expense Insurance expense Office supplies expense Depreciation expense - Office equipment 435 750 200 3,600 500 2,600 Wages expense 8,085 Total expenses Net income $ 6,605 Adjusted LINKWORKS Statement of Retained Earnings For Month Ended April 30, 2017 Retained earnings, April 1, 2017 Add: Net income Less: Withdrawals by owner Retained earnings, April 30, 2017 0 6,605 (5,500) 1,105 LINKWORKS Balance Sheet April 30, 2017 ASSETS Current assets: Cash Accounts receivable Office supplies Prepaid insurance Prepaid rent 59,465 6,290 600 2,200 8,250 $ 76,805 34,000 (500) Total current assets Plant assets: Office equipment Accumulated depreciation - Office equipment Office equipment, net Total assets LIABILITIES AND EQUITY Liabilities: Accounts payable Wages payable 33,500 110,305 $ 600 2,600 3,200 Total liabilities Equity: Common stock Retained earnings Total equity Total liabilities and equity 106,000 1,105 107,105 110,305 $ Impact on net income $ (750) (200) (3,000) (500) Account affecting the: Adjusting entry related to: Income Statement Balance Sheet a) Rent Rent expense Prepaid rent b) Insurance Insurance expense Prepaid insurance c) Office supplies Office supplies expense Office supplies d) Depreciation Depreciation expense - Office Accumulated depreciation - Office equipment equipment e) Unbilled fees Services revenue Accounts receivable f) Unpaid wages Wages expense Wages payable Total impact on income due to adjustments Net income before adjustments Net income after adjustments Had the adjustments not been prepared, income would have been overstated by $ (1,200)| (2,600) (8,250) (5,250) (13,500) (61.1)% $