A Company Issued Financial Statements for the Year Ended December

question 137

Essay

A company issued financial statements for the year ended December 31, but failed to include the following adjusting entries:
A. Accrued interest revenue earned of $1,200.
B. Depreciation expense of $4,000.
C. Portion of prepaid insurance expired (an asset)used $1,100.
D. Accrued taxes of $3,200.
E. Revenues of $5,200, originally recorded as unearned, have been earned by the end of the year. Determine the correct amounts for the December 31 financial statements by completing the following table:
$\begin{array}{|lcccc|}\hline & \text { Assets } & \text { Liabilities } & \text { Equity } & \text { Net Income } \\\hline \begin{array}{l}\text { Reported } \\\text { amounts }\end{array} & \$ 350,000 & \$ 200,000 & \$ 150,000 & \$ 70,000 \\\hline \text { Add (subtract) to }\\\text { correct for item: }\\\hline A\\\hline\end{array}$
$$\text { Education. }$$
$\begin{array} { l }\hline A\\\hline B\\\hline C\\\hline D\\\hline E\\\hline \text { Corrected amounts }&\$&\$&\$&\$\\\hline \end{array}$

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Definitions:

Resource Scarcity

A situation where resources are limited in availability and cannot satisfy all uses and desires.

Opportunity Costs

The potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Equilibrium

A state in a market where supply equals demand, meaning that there is no tendency for the market price to change unless external factors alter supply or demand.

Specializing

The process by which individuals, businesses, or countries focus on producing a limited range of goods or services, to gain a competitive advantage in terms of efficiency, quality, or cost.