The Schauer Company Had the Following Adjustments at December 31

question 79

Essay

The Schauer Company had the following adjustments at December 31, 2017, the end of the accounting period:
A. The Schauer Company uses straight-line depreciation for its equipment. The cost of the equipment is $105,000 and the useful life is 5 years. The equipment was purchased on January 1, 2017 and has no residual value.
B. Accrued interest of $10,000 on a note receivable will be received in January.
C. On November 1, 2017, the Schauer Company paid $3,000 for six months of rent in advance. The rental period is November 1, 2017 through April 30, 2018.
D. On August 1, 2017, the company collected $24,000 in advance for a consulting contract, which is to be earned evenly over the next 24 months.
E. Employees are owed salaries for 3 days of a 5 day workweek; weekly payroll is $30,000.
F. The unadjusted balance of the supplies account is $2,750. Based on a physical count, the cost of supplies on hand is $1,000.
G. The company has incurred interest expense of $1,000 that will be paid in January.
Required:
1. Journalize the adjusting entries. Explanations are not required.
2. Assuming the adjustments were not made, calculate the net overstatement or understatement this would have on net income. Would the company appear to be more or less profitable if the adjustments were not made?

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Definitions:

Endothelial Cells

Cells that line the interior surface of blood vessels and lymphatic vessels, forming an interface between circulating blood or lymph in the lumen and the rest of the vessel wall.

Basic Animal Tissues

The main types of tissues in animals, including epithelial, connective, muscle, and nervous tissues.

Epithelial

Pertaining to the epithelium, a layer of cells covering the body surfaces, lining hollow organs, and forming glands.

Nervous

Relating to the nervous system, which is the network of nerve cells and fibers that transmits nerve impulses between parts of the body.