Lily Company normally adjusts its books monthly. Below are some transactions in May 2023. (1) On...

  

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Lily Company normally adjusts its books monthly. Below are some transactions in May 2023. (1) On 1 May 2023, the Company borrowed an eight-month 5% bank loan of $120,000. The entire loan plus the accrued interest is due on 31 December 2023. None of the interest accrued is recorded. (2) On 31 May 2023, the Company billed customers $10,000 for the services rendered and the transaction is not recorded in the book. (3) On 31 May 2023, the Director of the Company recorded a dividend of $30,000 as an expense reported in the income statement. (4) On 1 May 2023, the Company purchased a $50,000 equipment on credit and debited to "Marketing expense" by mistake. The equipment has a useful life of 50 months using straight-line method for depreciation. (5) On 31 May 2023, the Company paid $80,000 to purchase a car and recorded it as asset. The car is actually for the personal use of Lily (Company's owner). Required: Copy the table on your answer sheet. Transactions (1) to (5) above are independent events. Assume other than the entries mentioned in the question were recorded, no other adjusting entries were made by the end of May. Indicate the effects of such error have on the Company's book as at 31 May 2023, if any. State O=overstated (with S amount), U= understated (with S amount) and NE = no effect For example: There is a $500 accrued and unrecorded fees earned for the Company in May. If no adjusting entry is made in May, the effect on the book is: e.g. (1) (2) (3) (4) (5) Revenue Expenses Profit U$500 NE U$500 Assets U $500 Liabilities Equity US500 NE Lily Company normally adjusts its books monthly. Below are some transactions in May 2023. (1) On 1 May 2023, the Company borrowed an eight-month 5% bank loan of $120,000. The entire loan plus the accrued interest is due on 31 December 2023. None of the interest accrued is recorded. (2) On 31 May 2023, the Company billed customers $10,000 for the services rendered and the transaction is not recorded in the book. (3) On 31 May 2023, the Director of the Company recorded a dividend of $30,000 as an expense reported in the income statement. (4) On 1 May 2023, the Company purchased a $50,000 equipment on credit and debited to "Marketing expense" by mistake. The equipment has a useful life of 50 months using straight-line method for depreciation. (5) On 31 May 2023, the Company paid $80,000 to purchase a car and recorded it as asset. The car is actually for the personal use of Lily (Company's owner). Required: Copy the table on your answer sheet. Transactions (1) to (5) above are independent events. Assume other than the entries mentioned in the question were recorded, no other adjusting entries were made by the end of May. Indicate the effects of such error have on the Company's book as at 31 May 2023, if any. State O=overstated (with S amount), U= understated (with S amount) and NE = no effect For example: There is a $500 accrued and unrecorded fees earned for the Company in May. If no adjusting entry is made in May, the effect on the book is: e.g. (1) (2) (3) (4) (5) Revenue Expenses Profit U$500 NE U$500 Assets U $500 Liabilities Equity US500 NE

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1 Unrecorded interest expense on the bank loan The effect of the unrecorded interest expense is that ... View the full answer