USE THE FOLLOWING INFORMATION TO ANSWER A-E

A. Magic Cleaning Services has a fiscal year end of December 31st. It is in its first year of operations. As of December 31, Magic has the following unadjusted trial balance:

Account	Debit	Credit
Cash	$430,900
Accounts Receivable	$158,000
Supplies	$ 90,000
Building	$111,000
Accounts Payable		$ 46,100
Unearned Service Revenue		$ 108,000
Common Stock		$ 100,000
Retained Earnings		-0-
Service Revenue		$ 619,200
Wage Expense	$ 48,600
Rent Expense	$ 12,600
Utilities Expense	$ 6,200
Administrative Expense	$ 16,000	___________
TOTALS	$ 873,300	$ 873,300

In addition, Magic has not yet adjusted for the following:

1. The building was purchased on March 1 of the current year. It has a 30-year life, 10% salvage value and Magic uses the straight-line method for depreciation.

2. On April 1, Magic prepaid $12,600 for 12 months of rent on a warehouse. The original entry was recorded as Rent Expense.

3. By December 31st, 40% of the of the services related to the Unearned Revenues had been performed.

4. Wages of $4,800 should be accrued and are scheduled to be paid on January 2.

5. Supplies of $75,000 were still on hand at year end.

6. Based on industry averages, it is estimated that 2.5% of the accounts receivable will prove to be uncollectible.

Required:

To record AJE #2, Magic should do which of the following to record the correct adjustment:

Group of answer choices

credit Prepaid Rent for $9,450

debit Rent Expense for $3,150

Debit Prepaid Rent for $9,450

credit Rent Expense for $3,150

B.

Using the information presented above for Magic Cleaning Services, determine Net Income AFTER all adjustments have been recorded: $_____________________________

Group of answer choices

$535,800

$555,625

$560,670

$517,470

$520,800

C.

Using the information presented for Magic Cleaning Services, IF none of the (6) adjusting journal entries had been recorded, determine the effect on Total Assets.

ASSETS	LIABILITIES	EQUITY
???

Group of answer choices

Overstated by $18,575

Overstated by $15,800

Overstated by $15,000

Overstated by $13,025

D.

Using the information presented for Magic Cleaning Services, IF none of the (6) adjusting journal entries had been recorded, determine the effect on Total Liabilities.

ASSETS	LIABILITIES	EQUITY
	???

Group of answer choices

Understated by $4,800

Overstated by $43,200

Understated by $48,000

Overstated by $38,400

E.

Using the information presented for Magic Cleaning Services, IF none of the (6) adjusting journal entries had been recorded, determine the effect on Total EQUITY.

ASSETS	LIABILITIES	EQUITY
		???

Group of answer choices

Understated by $23,400

Understated by $26,550

Overstated by $21,725

Understated by $19,825