West Beach Resort operates a resort complex that specializes in hosting small business and professional meetings. West Beach closes its fiscal year on January 31, a time when it has few meetings under way. At January 31, 2012, the following data are available:
a. A training meeting is under way for 16 individuals from Fashion Design. Fashion Design paid $4,500 in advance for each person attending the 10-day training session. The meeting began on January 28 and will end on February 6.
b. Twenty-one people from Northern Publishing are attending a sales meeting. The daily fee for each person attending the meeting is $280 (charged for each night a person stays at the resort). The meeting began on January 29, and guests will depart on February 2. Northern will be billed at the end of the meeting.
c. Depreciation on the golf carts used to transport the guests’ luggage to and from their rooms is $11,250 for the year. West Beach records depreciation yearly.
d. At January 31, Friedrich Catering is owed $1,795 for food provided for guests through that date. This amount is unrecorded. West Beach classifies the cost of food as an ‘‘other expense’’ on the income statement.
e. An examination indicates that the cost of office supplies on hand at January 31 is $189. During the year, $850 of office supplies was purchased from Supply Depot. The cost of supplies purchased was debited to office supplies inventory. No office supplies were on hand on January 31, 2011.
1. Prepare adjusting entries at January 31 for each of these items.
2. By how much would net income be overstated or understated if the accountant failed to make the adjusting entries?

  • CreatedSeptember 22, 2015
  • Files Included
Post your question