Asked by Natalie James on Jun 19, 2024
Verified
On December 31, a business estimates depreciation on equipment used during the first year of operations to be $2,900.
(a) Journalize the adjusting entry required on December 31.
(b) If the adjusting entry in
(a) were omitted, which items would be erroneously stated on
(1) the income statement for the year and
(2) the balance sheet as of December 31?
Depreciation
The systematic allocation of the cost of a tangible asset over its useful life.
Adjusting Entry
Journal entries made in accounting records at the end of an accounting period to update accounts for accurate financial reporting.
Income Statement
A financial statement that outlines a company's revenues and expenses over a specific period, showing net profit or loss.
- Detail the adjusting entries in the journal for unearned revenues, prepaid expenses, accrued expenses, and depreciation.
- Discuss how overlooking adjusting entries influences financial reporting.
Verified Answer
CW
Candace WilliamsJun 22, 2024
Final Answer :
(a)Depreciation Expense2,900Accumulated Depreciation-Equipment2,900
(b)
(1) Depreciation expense would be understated. Net incomewould be overstated.
(2) Accumulated depreciation would be understated, andtotal assets would be overstated. Owner's equitywould be overstated.
(a)Depreciation Expense2,900Accumulated Depreciation-Equipment2,900
(b)
(1) Depreciation expense would be understated. Net incomewould be overstated.
(2) Accumulated depreciation would be understated, andtotal assets would be overstated. Owner's equitywould be overstated.
Learning Objectives
- Detail the adjusting entries in the journal for unearned revenues, prepaid expenses, accrued expenses, and depreciation.
- Discuss how overlooking adjusting entries influences financial reporting.