Unadjusted Financial Statements

These financial statements were prepared from the unadjusted trial balance.

Cole Designs Inc.
Income Statement
For the Year Ended December 31, 20Y3
Fees earned	$69,000
Wages expense	(44,600)
Net income	$24,400

Cole Designs Inc.
Balance Sheet
December 31, 20Y3
Assets
Cash			$5,250
Accounts receivable			31,200
Supplies			3,525
Prepaid insurance			3,200
Office equipment			11,000
Total assets			$54,175
Liabilities
Unearned fees			$9,200
Stockholders Equity
Common stock	$12,000
Retained earnings	32,975		44,975
Total liabilities and stockholders equity			$54,175

Adjusted Financial Statements

These financial statements were prepared from the adjusted trial balance.

Cole Designs Inc.
Income Statement
For the Year Ended December 31, 20Y3
Fees earned			$74,200
Expenses:
Wages expense	$47,200
Supplies expense	3,465
Insurance expense	2,200
Depreciation expense	2,100
Total expenses			(54,965)
Net income			$19,235

Cole Designs Inc.
Balance Sheet
December 31, 20Y3
Assets
Cash			$5,250
Accounts receivable			31,600
Supplies			60
Prepaid insurance			1,000
Office equipment	$11,000
Accumulated depreciation-office equipment	(2,100)		8,900
Total assets			$46,810
Liabilities
Wages payable			$2,600
Unearned fees			4,400
Total liabilities			$7,000
Stockholders Equity
Common stock	$12,000
Retained earnings	27,810		39,810
Total liabilities and stockholders equity			$46,810

Accounting Bases Under which basis of accounting would adjusting entries never be recorded? Which accounts would most likely not be used under the cash basis of accounting? a. Supplies Expense b. Unearned Fees C. Accounts Payable d. Revenue e. Accounts Receivable f. Cash Matching Principle/Revenue Recognition Under the accrual basis of accounting, many of the account balances in the ledger at the end of the accounting period are reported on the financial statements without change. Some accounts require updating, though. When preparing financial statements, the economic life of the business is divided into time periods. The matching principle states that Under the accrual basis of accounting, the revenue recognition principle states that Review the following selected transaction data of a business for April. Keeping the matching principle in mind, indicate which of the following would be used to compute net income for the month of April. a. Cash paid in April for expenses incurred in May. b. Cash paid in April for expenses incurred in April. c. Cash received in April from customers for services performed in May. d. Expenses incurred in April but not paid until June. e. Services provided to customers on account during April. f. Cash received from cash customers for services performed in April. Overstated, Understated Assume that the Cole Designs Inc. financial statements in the Unadjusted Financial Statements panel were prepared from the unadjusted trial balance and the financial statements in the Adjusted Financial Statements panel were prepared from the adjusted trial balance. For the following financial statement items, indicate Yes or No if the item was overstated, understated or neither on the financial statements prepared using the unadjusted trial balance. Overstated Understated Neither Net income Stockholders' equity Revenues Total assets Total expenses Total liabilities Adjusting Entries Journalize the six December 31 adjusting entries for Cole Designs Inc. that adjusted the accounts to arrive at the financial statements in the Adjusted Financial Statements panel. If an amount box does not require an entry, leave it blank. Dec. 31 Accounts Receivable Rectangular Snip Dec. 31 Supplies Expense Dec. 31 Insurance Expense Dec. 31 Depreciation Expense Dec. 31 Wages Expense II III Dec. 31 Unearned Fees