Ellis Company accumulates the following adjustment data at December 31.
1. Revenue of $800 collected in advance has been earned.
2. Salaries of $400 are unpaid.
3. Prepaid rent totaling $450 has expired.
4. Supplies of $350 have been used.
5. Revenue earned but unbilled totals $750.
6. Utility expenses of $300 are unpaid.
7. Interest of $250 has accrued on a note payable.
(a) For each of the above items indicate:
1. The type of adjustment (prepaid expense, unearned revenue, accrued revenue, or accrued expense).
2. The account relationship (asset/liability, liability/revenue, etc.).
3. The status of account balances before adjustment (understatement or overstatement).
4. The adjusting entry.
(b) Assume net income before the adjustments listed above was $15,500. What is the adjusted net income?
Prepare your answer in the tabular form presented below. Item 1. is completed as an example of how to complete the table.
Before Adjustment Income Effect
Type of Account (Understatement Increase
Adjustment Relationship or Overstatement) Adjusting Entry (Decrease)
1. Unearned Liability/revenue Liability - over Unearned svc revenue 800
Revenue Revenue - under Service revenue
Solution to your posted problem is provided in a separate Excel sheet in tabular form along with necessary workings for Adjusted Net Income.