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

a. The company received its electric bill on December 20 for $ 230 but will not pay it until January 5. (Use the Utilities Payable account.)

b. Dillon purchased a six-month boat insurance policy on November 1 for $ 4,800. Dillon recorded a debit to Prepaid Insurance.

c. As of December 31, Dillon had earned $ 2,500 of charter revenue that has not been recorded or received.

d. Dillon’s fishing boat was purchased on January 1 at a cost of $ 60,000. Dillon 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, Dillon received $ 8,000 prepayment for a deep-sea fishing charter that will take place in December. As of December 31, Dillon has completed the charter.

Requirements

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

2. If Dillon 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 aguide.

Transcribed Image Text:

Specific Categary of Specific Categcry of Accounts on the Adusting Accounts on the Entry Over / Understated Over ! Understated Balance Sheet Income Staternent