Dyer, Inc., completed its first year of operations on December 31, 2015. Because this is the end
Question:
Dyer, Inc., completed its first year of operations on December 31, 2015. Because this is the end of the annual accounting period, the company bookkeeper prepared the following preliminary income statement:
You are an independent CPA hired by the company to audit the firm’s accounting systems and financial statements. In your audit, you developed additional data as follows:
a. Wages for the last three days of December amounting to $310 were not recorded or paid.
b. The $400 telephone bill for December 2015 has not been recorded or paid.
c. Depreciation of equipment amounting to $23,000 for 2015, was not recorded.
d. Interest of $500 was not recorded on the note payable by Dyer, Inc.
e. The Rental Revenue account includes $4,000 of revenue to be earned in January 2016.
f. Supplies costing $600 were used during 2015, but this has not yet been recorded.
g. The income tax expense for 2015 is $7,000, but it won’t actually be paid until 2016.
Required:
1. What adjusting journal entry for each item ( a ) through ( g ) should be recorded at December 31, 2015? If none is required, explain why.
2. Prepare, in proper form, an adjusted income statement for 2015.
3. Did the adjustments have a significant overall effect on the company’s net income?
Step by Step Answer:
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby