Entries for the Following Items Were Either Omitted or Recorded $\text { Total Assets\quad\quad Total Liabilities\quad\quad\quad Net Income }$

question 51

Essay

Entries for the following items were either omitted or recorded incorrectly in preparing the financial statements for Year 3.Indicate the amount and nature [understatement (U), overstatement (O), no effect (N)] of the effect of the omission on total assets, total liabilities, and net income for Year 3.Ignore income tax effects.Use the following format:
$\text { Total Assets\quad\quad Total Liabilities\quad\quad\quad Net Income }$
a. On December 1, Year 3, a firm debits Prepaid Rent (Advances to Car Rental Agency) for $600 for 6 months' rent on an automobile. The firm has neglected to make the adjusting entry on December 31.
b. A firm debits Administrative Expenses for $6,000 for a microcomputer acquired on July 1, Year 3. The microcomputer has an expected useful life of 3 years and zero estimated salvage value.
c. A firm rents out excess office space for the 6-month period beginning January 1, Year 3. It received the rental check for this period of $600 on December 26, Year 2, and correctly credited Advances from Tenants. It made no further journal entries during Year 3.
d. Interest on Notes Receivable of $500 had accrued by December 31, Year 3, but the firm overlooked making an entry to record this interest.
e. A firm receives a check for $250 from a customer on December 31, Year 3, in settlement of an account receivable. The firm recorded this entry with a credit to Sales.
f. A firm records as $470 an expenditure of $740 for travel during December, Year 3.

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Definitions:

Joint And Several

A legal term referring to the shared and individual responsibility of two or more parties to fulfill the entirety of an obligation or debt.

Partnership Law

Legal regulations governing the formation, operation, and dissolution of a partnership, which is a business entity owned by two or more people.

Liability

The state of being legally responsible for something, such as a debt or obligation.

Revised Uniform Partnership Act

An updated set of laws that provide a legal framework for the formation, operation, and dissolution of partnerships in the United States.