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Effect on Assets, Liabilities & Net Income

28) At the end of the current year, the adjusting entries described below are omitted. If the financial statements are prepared without these adjustments, what would be the effect? Describe the effect of each individual error (overstated, understated, no effect) by placing the appropriate dollar amount in the table.

a.    No adjusting entry was made for $2,000 of expired insurance.
b.    No adjusting entry was made for $3,000 of services that had been provided and billed, but not yet received.
c.    No adjusting entry was made for $4,000 of depreciation.
d.    No adjusting entry was made for $1,000 of utilities expense incurred.

Effect on Total Assets Effect on Total Liabilities Effect on Net Inc.

a.

b.

c.

d.

Solution Preview

Overstated

Expired Insurance 2000
Services
Depreciation 4000
Utility Expense 1000

Total 7000

No Effect

Services $3000

a - Net Income ...

Solution Summary

The solution discusses the effect on assets, liabilities and net income if adjusting entries were not made.

$2.19