On 30 June 2020, james prepared an income statement and a statement of financial position but failed to take into account several adjusting entries. The incorrect income statement showed a profit of $40 000. The statement of financial position showed total assets, $120 000; total liabilities, $50 000; and equity, $70 000.

The following adjustments need to be made:

(1) Depreciation of $7000 was not recorded on equipment.

(2) Wages amounting to $8000 for the last two days in June were not paid and not recorded. The next payroll will be in July.

(3) Rent of $12 000 was paid for two months in advance on 1 June. The entire amount was debited to Rent Expense when paid.

Required

a) Prepare the adjusting entries at 30 June 2020, with narrations.

b) Complete the following tabulation to correct the financial statement amounts shown (indicate deductions with a bracket) (

Item Profit Total assets Total liabilities Equity

Incorrect balances $40 000 $120 000 $50 000 $70 000

Effects of:

Depreciation

Wages

Rent

Correct balances

c) Comment on the impact on total assets if the above adjustments were not made.