P3-34A Journalizing adjusting entries and identifying the impact on financial

statements

Griffin Fishing Charters has collected the following data for the December 31 adjusting entries:

A.The company received its electric bill on December 31 for $375 but will not pay it until January 5. (Use the Utilities Payable account.)

B.Griffin purchased a three-month boat insurance policy on November 1 for $1,200. Griffin recorded a debit to Prepaid Insurance.

C.As of December 31, Griffin had earned $3,000 of charter revenue that has not been recorded or received.

D.Griffins fishing boat was purchased on January 1 at a cost of $33,500. Griffin expects to use the boat for 10 years and that it will have a residual value of $3,500. Determine annual depreciation assuming the straight-line depreciation method is used.

E.OnOctober1,Griffinreceived$9,000prepaymentforadeep-seafishingcharter to take place in December. As of December 31, Griffin has completed the charter.

Requirements

1.JournalizetheadjustingentriesneededonDecember31forGriffinFishing

Charters. Assume Griffin records adjusting entries only at the end of the year.

2.If Griffin had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide.

Adjusting Entry Specific Category of Accounts on the Balance Sheet Over Understated Income Statement Understated Specific Category of Accounts on the Over