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:

a. Supplies were purchased on January 1, 20X1; inventory of supplies on January 31, 20X1, is $1,300.

b. The prepaid advertising contract was signed on January 1, 20X1, and covers a four-month period.

c. Rent of $1,800 expired during the month.

d. Depreciation is computed using the straight-line method. The equipment has an estimated useful life of 10 years with no salvage value

Required:

1. Complete the worksheet for the month.

2. Prepare an income statement, statement of owner's equity, and balance sheet. No additional investments were made by the owner during the month

3. 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?

CREATIVE DESIGNS Wars Morth Ended Lauary 31, 20X1 Amunt Allied Trial De Crede De Acc Name The Balance De Cred 1.000 13.000 Credit inte Deh can Avale Crei malt Deshin CH w Parer mm doc 21100 40 Account Stayla Green, Shayla Creek www Fees heume 15. 400 7.400 200 Despre con 1.100 Scoles Us expen 100 134550 1340 OS 03 0 1 1 05 Tea D.