Shayla Green owns Creative Designs. The trial balance of the firm for January 31, 20X1, the first
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Question:
Shayla Green owns Creative Designs. The trial balance of the firm for January 31, 20X1, the first month of operations, is shown below.
End-of-the-month adjustments must account for the following items:
- Supplies were purchased on January 1, 20X1; inventory of supplies on January 31, 20X1, is $3,200.
- The prepaid advertising contract was signed on January 1, 20X1, and covers a four-month period.
- Rent of $4,200 expired during the month.
- Depreciation is computed using the straight-line method. The equipment has an estimated useful life of 10 years with no salvage value.
Required:
- Complete the worksheet for the month.
- Prepare an income statement, statement of owner’s equity, and balance sheet. No additional investments were made by the owner during the month.
- Journalize and post the adjusting entries.
Analyze:
If the adjusting entries had not been made for the month, by what amount would net income be overstated or understated?
Related Book For
Accounting
ISBN: 978-0132569309
9th Edition
Authors: Charles T. Horngren, Walter T. Harrison Jr., M. Suzanne Oliv
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