Prepare and Analyze Adjusting Journal Entries Fannie Corp. started operations on January 1. It is now December 31, the end of its annual accounting period and the company has just prepared the following financial statements. Fannie Corp. Income Statement For Year Ended December 31 Service revenue $100,000 Expenses Salaries $30,000 Repairs 5,000 Service 25,000 Other miscellaneous 10,000 70,000 Net income $30,000 Fannie Corp. Balance Sheet December 31 Liabilities Assets Cash $7,500 Accounts payable $8,000 Note receivable, 8% 1,200 Note payable, 6% 24,000 Supplies Equipment 6,000 Total liabilities 32,000 90,000 Stockholders' Equity Other Assets 7,300 Common stock 50,000 Retained earnings 30,000 Total stockholders' equity 80,000 Total assets $112,000 Total liabilities and stockholders' equity $112,000 The above statements (unaudited) were presented to a local bank, at the bank's request, to The above statements (unaudited) were presented to a local bank, at the bank's request, to support a loan request. The bank requested that the statements be examined by an independent CPA. Among other accounting issues, we find that the following items were not considered by the company in preparing the income statement and balance sheet. 1. Service revenue of $2,000 had been collected but the related obligations had not been performed as of December 31. 2. At December 31, salaries earned by employees but not yet paid or recorded amount to $9,000. 3. A count of supplies at December 31, showed $4,000 of supplies still available. (Supplies are used in repairs.) 4. Depreciation on the equipment acquired on January 3, was not recorded. The estimated useful life is 10 years. 5. The note receivable received was from a customer and was dated November 1; the principal plus interest is payable April 30 of next year. 6. The note payable to the local bank was dated June 1; the principal plus interest is payable May 31 of next year. 7. Income tax expense is $1,386. Assume that no income tax has been recorded. Record as income taxes payable. a. Prepare the adjusting entries that are necessary, if any, on December 31 for each item 1 through 7. Ref. Account Name Dr. Cr. b. Determine the effect of each item 1 through 7 on the following categories by indicating the amount reported, the net adjustment, and the adjusted amount. 1. Net income 2. Assets 3. Liabilities 4. Stockholders' equity Note: Use a negative sign for adjustment answers, as needed. Net income As reported $ 0 Adjustments 0 Net income, adjusted $ 0 Assets As reported $ 0 Adjustments 0 Assets, adjusted $ 0 Liabilities As reported $ 0 Adjustments 0 Liabilities, adjusted $ 0 Stockholders' equity As reported $ 0 Adjustments 0 Stockholders' equity, adjusted $ 0