At the End of the Fiscal Year, the Following Adjusting $\$ 3,000$

question 5

Essay

At the end of the fiscal year, the following adjusting entries were omitted:
(a) No adjusting entry was made to transfer the $\$ 3,000$ of prepaid insurance from the asset account to the expense account.
(b) No adjusting entry was made to record accrue d fees of $\$ 500$ for services provided to customers. Assuming that financial statements are prepared before the errors are discovered, indicate the effect of each error, considered individually, by inserting the dollar amount in the appropriate spaces. Insert "0" if the error does not affect the item.
$\begin{array}{llll}&&&\text { Error (a) }&\text { Error (b) }\\&\text { Overstated}&\text { Understated}& \text { Overstated } &\text { Understated} \\(1)\text { Assets at December } 31 \text { would be } &\$ & \$ & \$ &\$ \\(2) \text { Liabilities at Dec. } 31 \text { would be }&\$ & \$ & \$ &\$ \\(3)\text { Net income for the year would }be&\$ & \$ & \$ &\$ \\(4)\text { Retained earnings at Dec. 31 would be}&\$ & \$ & \$ &\$ \end{array}$

---

Definitions:

Sodium

A chemical element with symbol Na and atomic number 11, known for its role in nerve impulse transmission and muscle contraction.

Covalent Compound

A compound in which atoms are held together by covalent bonds; covalent compounds consist of molecules. Compare with ionic compound.

Methane

A colorless, odorless gas, CH4, that is the simplest alkane and a major component of natural gas, contributing to greenhouse gas emissions.

Potassium Chloride

A metal halide salt composed of potassium and chlorine, used in various applications including as a fertilizer, in medicine, and in food processing.