Required:

a)

Using the above additional information, prepare the adjusting entries that should be made by Holmes Ltd on 31

August 2022. Narrations ARE NOT required (10 marks)

b)

If the adjusting entry relating to point 4 above was not recorded, what would be the impact on revenue and

liabilities? You may use the terms overstated, understated or no affect. (2 marks)

balance before any adiustiness on 1 July 2022 and prepares monthly financial statements. The unadjusted trial balance before any adjustments have been made for the month of August is presented below. An analysis of the account balances by the company's accountant provided the following additional information at the end of August: 1. Holmes Ltd paid rent of $12,000 for the 3-month period covering 1 July 2022 to 30th September 2022 . The rent was recorded as a prepayment at date of payment. 2. A physical count of stationery supplies revealed $1,100 on hand on 31 August 2022. 3. The business received a $1,300 mobile phone bill from Optel Communications for the month of August 2022. The bill remains unpaid at 31 August 2022. 4. The amount of revenue received in advance that remains unearned at 31 August is $500. 5. The motor vehicles are depreciated at $400 per month