Cecily Fishing Charters has collected the following data for the December 31 adjusting entries:

a. The company received its electric bill on December 20 for \($400\) but will not pay it until January 5. (Use the Utilities Payable account.)

b. Cecily Fishing Charters purchased a six-month boat insurance policy on November 1 for \($1,800.\) Cecily Fishing Charters recorded a debit to Prepaid Insurance.

c. As of December 31, Cecily Fishing Charters had earned \($2,300\) of charter revenue that has not been recorded or received.

d. Cecily Fishing Charters’ fishing boat was purchased on January 1 at a cost of \($50,000.\) Cecily Fishing Charters expects to use the boat for five years and that it will have a residual value of \($5,000.\) Determine annual depreciation assuming the straight-line depreciation method is used.

e. On October 1, Cecily Fishing Charters received \($6,000\) prepayment for a deep-sea fishing charter to take place in December. As of December 31, Cecily Fishing Charters has completed the charter.

Requirements 

1. Journalize the adjusting entries needed on December 31 for Cecily Fishing Charters. Assume Cecily Fishing Charters records adjusting entries only at the end of the year.

2. If Cecily Fishing Charters had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide:

Transcribed Image Text:

Specific Category of Over/ Adjusting Entry Accounts on the Balance Sheet Understated Specific Category of Accounts on the Income Statement Over/ Understated