Critical Thinking Problem $5\mathrm{.}2($Algo$)$ Worksheet and Financial Statements

The account balances for the Wesson International Company on January $31,20$X$1,$ follow. The balances shown are after the first month of operations.

$101$ Cash $ $18,635401$ Fees income $ $31,485$

$111$ Accounts receivable $3,400511$ Advertising expense $1,580$

$121$ Supplies $2,270514$ Depreciation expense$$Equipment $0$

$131$ Prepaid insurance $15,600517$ Insurance expense $0$

$141$ Equipment $26,000518$ Rent expense $2,500$

$142$ Accumulated depreciation$$Equipment $0519$ Salaries expense $6,860$

$202$ Accounts payable $6,200520$ Supplies expense $0$

$301$ Rickyl Wesson, Capital $42,600523$ Telephone expense $350$

$302$ Rickyl Wesson, Drawing $2,200524$ Utilities expense $890$

Adjustments:

Supplies used during the month amounted to $$1,110$

The amount in the Prepaid Insurance account represents a payment made on January $1,20$X$1,$ for $6$ months of insurance coverage.

The equipment, purchased on January $1,20$X$1,$ has an estimated useful life of $10$ years with no salvage value. The firm uses the straight$-$line method of depreciation.

Required:

Complete the worksheet.

Prepare an income statement, statement of owner$$s equity, and balance sheet.

Record the balances in the selected general ledger accounts, then journalize and post the adjusting entries.

Analyze:

If the useful life of the equipment had been $12$ years instead of $10$ years, how would net income have been affected?