Selected account balances before adjustment for Alantic Coast Realty at July 31, 2016, the end of the current year, are as follows:

	Debits	Credits
Accounts Receivable	$73,600
Equipment	346,600
Accumulated DepreciationEquipment		$107,000
Prepaid Rent	8,550
Supplies	3,090
Wages Payable
Unearned Fees		11,000
Fees Earned		672,400
Wages Expense	337,500
Rent Expense
Depreciation Expense
Supplies Expense

Data needed for year-end adjustments are as follows:

a.	Unbilled fees at July 31, $10,250.
b.	Supplies on hand at July 31, $710.
c.	Rent expired, $5,700.
d.	Depreciation The systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life. of equipment during year, $9,500.
e.	Unearned fees at July 31, $2,340.
f.	Wages accrued but not paid at July 31, $4,700.

	Required:
1.	Journalize the six adjusting entries required at July 31, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.
2.	What would be the effect on the income statement if adjustments (a) and (f) were omitted at the end of the year?
3.	What would be the effect on the balance sheet if adjustments (a) and (f) were omitted at the end of the year?
4.	What would be the effect on the Net increase or decrease in cash on the statement of cash flows if adjustments (a) and (f) were omitted at the end of the year?

none

X

Chart of Accounts

CHART OF ACCOUNTS

Alantic Coast Realty

General Ledger

	ASSETS
11	Cash
12	Accounts Receivable
13	Supplies
14	Prepaid Rent
15	Land
16	Equipment
17	Accumulated Depreciation-Office Equipment
19	Accumulated Depreciation-Automobiles

	LIABILITIES
21	Accounts Payable
22	Unearned Fees
23	Wages Payable
24	Taxes Payable

	EQUITY
31	Owner, Capital
32	Owner, Drawing

	REVENUE
41	Fees Earned
42	Rent Revenue

	EXPENSES
51	Advertising Expense
52	Insurance Expense
53	Rent Expense
54	Wages Expense
55	Supplies Expense
56	Utilities Expense
57	Depreciation Expense
59	Miscellaneous Expense

none

X

Journal

1. Journalize the six adjusting entries required at July 31, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11
12
13

Solution

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1		Adjusting Entries
2
3
4
5
6
7
8
9
10
11
12
13

Points:

Feedback

Check My Work

Explanation

none

X

Final Questions

2. What would be the effect on the income statement if adjustments (a) and (f) were omitted at the end of the year?

	Over/Understated	Amount
Fees earned	selector 1 Understated Overstated No effect
Wages expense	selector 2 Understated Overstated No effect
Net income	selector 3 Understated Overstated No effect

Points:

Feedback

Check My Work

Explanation

3. What would be the effect on the balance sheet if adjustments (a) and (f) were omitted at the end of the year?

	Over/Understated	Amount
Accounts receivable	selector 1 Understated Overstated No effect
Total assets	selector 2 Understated Overstated No effect
Wages payable	selector 3 Understated Overstated No effect
Total liabilities	selector 4 Understated Overstated No effect
Owners capital	selector 5 Understated Overstated No effect
Total liabilities and owners equity	selector 6 Understated Overstated No effect

Points:

Feedback

Check My Work

Explanation

4. What would be the effect on the Net increase or decrease in cash on the statement of cash flows if adjustments (a) and (f) were omitted at the end of the year? selector 1

Understated

Overstated

No effect

Points:

Feedback

Check My Work

Explanation