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

a. The company received its electric bill on December 20 for $225 but will not pay it until January 5- (Use the Utilities Payable account.)

b. Wright purchased a nine-month boat insurance policy on November 1 for $9,000. Wright recorded a debit to Prepaid Insurance.

c. As of December 31, Wright had earned $2,000 of charter revenue that has not been recorded or received.

d. Wright€™s fishing boat was purchased on January 1 at a cost of $44,500. Wright expects to use the boat for five years and that it will have a residual value of $4,500. Determine annual depreciation assuming the straight-line depreciation method is used.e. On October 1, Wright received $8,000 prepayment for a deep-sea fishing charter to take place in December. As of December 31, Wright has completed the charter.

Requirements

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

2. If Wright 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:

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