Textbook Problem

Adjusting entries

Selected account balances before adjustment for Intuit Realty at November 30, the end of the current year, follow:

	Debits	Credits
Accounts Receivable	$ 75,000
Equipment	250,000
Accumulated Depreciation—Equipment		$ 12,000
Prepaid Rent	12,000
Supplies	3,170
Wages Payable		—
Unearned Fees		10,000
Fees Earned		400,000
Wages Expense	140,000
Rent Expense	—
Depreciation Expense	—
Supplies Expense	—

Data needed for year-end adjustments are as follows:

• Supplies on hand at November 30, $550.
• Wages accrued but not paid at November 30, $2,000.
• Depreciation of equipment during year, $1,675.
• Unearned fees at November 30, $4,000.
• Rent expired during year, $8,500.
• Unbilled fees at November 30, $5,380

Instructions

1. 1. Journalize the six adjusting entries required at November 30, based on the data presented.
2. 2. What would be the effect on the income statement if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year?
3. 3. What would be the effect on the balance sheet if the adjustments for equipment deprecia­tion and unearned fees were omitted at the end of the year?
4. 4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if the adjustments for equipment depreciation and unearned fees were omitted at the end of the year?