Asked by Chyniquia Johnson on May 07, 2024
Verified
For the year ending June 30, Island Clinical Services mistakenly omitted adjusting entries for (1) $1,500 of supplies that were used, (2) unearned revenue of $4,200 that was earned, and (3) insurance of $5,000 that expired. What is the combined effect of these errors on (a) revenues, (b) expenses, and (c) net income for the year ending June 30?
Adjusting Entries
Journal entries made in the accounting records to correct or update financial information before the preparation of financial statements.
Unearned Revenue
Money received by an entity for goods or services yet to be delivered or rendered, recognized as a liability until the obligation is fulfilled.
- Delve into the consequences of overlooking adjusting entries on financial reports.
- Enact the principle of depreciation and observe its consequences on financial statements.
- Appreciate the value of supplies management and inventory adjustments in financial reporting outcomes.
Verified Answer
BA
Brittany AlejandreMay 10, 2024
Final Answer :
(a) Revenues were understated by $4,200
(b) Expenses were understated by $6,500 ($1,500 +$5,000)(c) Net income was overstated by $2,300 ($6,500 − $4,200)
(b) Expenses were understated by $6,500 ($1,500 +$5,000)(c) Net income was overstated by $2,300 ($6,500 − $4,200)
Learning Objectives
- Delve into the consequences of overlooking adjusting entries on financial reports.
- Enact the principle of depreciation and observe its consequences on financial statements.
- Appreciate the value of supplies management and inventory adjustments in financial reporting outcomes.
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