Problem 6-1

1. A Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Rent income under, NI under, 0 0 0 0
Miscellaneous income over, NI over
b. NP over and AP under but NI 0 0 0 0
Is unaffected
Adjusted Balance 200,000 160,000 200,000 360,000

2. B Over or (under)
2017
Unadjusted Balance 180,000
a. RI under, MI over, WC unaffected
b. NP over and AP under, WC unaffected
Adjusted Balance 180,000

3. A Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Rent income under, NI under, 0 0 0 0
Miscellaneous income over, NI over
b. NP over and AP under but NI 0 0 0 0
Is unaffected
Adjusted Balance 200,000 160,000 200,000 360,000

4. C
Net Income Retained Earnings
2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Rent income under, NI under, 0 0 0 0
Miscellaneous income over, NI over
b. NP over and AP under but NI 0 0 0 0
Is unaffected
Adjusted Balance 200,000 160,000 200,000 360,000

5. C
Over or (under)
2018
Unadjusted Balance 260,000
Adjusted Balance 260,000

6. C Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Rent income under, NI under, 0 0 0 0
Miscellaneous income over, NI over
b. NP over and AP under but NI 0 0 0 0
Is unaffected
Adjusted Balance 200,000 160,000 200,000 360,000

7. Adjusting entries
Year:
2017 Miscellaneous Income 25,000
Rent Income 25,000
Notes Payable 28,000
Accounts Payable 28,000
2018 No adjusting entries
2019 No Adjusting Entries

Problem 6-2
1. C Net Income Retained Earnings
2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Accrued Interest Expense under,
NI over, (15,000) 15,000 (15,000) 0
b. Accrued Rent Receivable under,
NI under 20,000 (20,000) 20,000 0
c. Insurance Expense over,
NI under 6,000 (6,000) 6,000 0
d. Rent Revenue over, NI over (7,500) 7,500 (7,500) 0
Adjusted Balance 203,500 156,500 203,500 360,000

2. B
Working Capital Over or (under)
1. Accrued Interest Expense under, WC over 15,000
2. Accrued Rent Receivable under, WC under (20,000)
3. Insurance Expense over, WC under (6,000)
4. Rent Revenue over, WC over 7,500
Effect on working Capital (understated) (3,500)
Unadjusted Working capital 180,000
Working Capital 2017 183,500

3. C Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Accrued Interest Expense under,
NI over, (15,000) 15,000 (15,000) 0
b. Accrued Rent Receivable under,
NI under 20,000 (20,000) 20,000 0
c. Insurance Expense over,
NI under 6,000 (6,000) 6,000 0
d. Rent Revenue over, NI over (7,500) 7,500 (7,500) 0
Adjusted Balance 203,500 156,500 203,500 360,000

4. C Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Accrued Interest Expense under,
NI over, (15,000) 15,000 (15,000) 0
b. Accrued Rent Receivable under,
NI under 20,000 (20,000) 20,000 0
c. Insurance Expense over,
NI under 6,000 (6,000) 6,000 0
d. Rent Revenue over, NI over (7,500) 7,500 (7,500) 0
Adjusted Balance 203,500 156,500 203,500 360,000

5. B
Working Capital unadjusted 260,000
Adjustment: -
Adjusted Working Capital 260,000

6. C Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
a. Accrued Interest Expense under,
NI over, (15,000) 15,000 (15,000) 0
b. Accrued Rent Receivable under,
NI under 20,000 (20,000) 20,000 0
c. Insurance Expense over,
NI under 6,000 (6,000) 6,000 0
d. Rent Revenue over, NI over (7,500) 7,500 (7,500) 0
Adjusted Balance 203,500 156,500 203,500 360,000

7. Adjusting Entries
2017 Interest Expense 15,000
Interest Payable 15,000
Rent Receivable 20,000
Rent Income 20,000
Prepaid Insurance 6,000
Insurance Expense 6,000
Rent Revenue 7,500
Unearned Rent Revenue 7,500
2018 Retained Earnings 15,000
Interest Expense 15,000
Rent Income 20,000
Retained Earnings 20,000
Insurance Expense 6,000
Retained Earnings 6,000
Retained Earnings 7,500
Rent Revenue 7,500
Problem 4
1. D Net Income Retained Earnings
2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
1. Insurance Expense under,
NI over, (30,000) (6,000) (30,000) (36,000)
2. Rev. under, NI under 20,000 10,000 20,000 30,000
3. Depreciation over, NI over 12,000 12,000 12,000
4. Repair Expense over, NI under 200,000 200,000
Depreciation under, NI over (50,000) (50,000) (50,000)
5. Other Income (20,000) (12,000)
Gain on Sale 8,000
6. Repairs Expense under, NI over (20,000) (20,000)
Depreciation 5,000 5,000 5,000
Adjusted Balance 325,000 119,000 325,000 366,000

2. A
Working Capital Over or (under)
Prepaid Insurance overstated, WC Overstated 30,000
Unearned Rent Revenue overstated, WC understated (20,000)
Effect (overstated) 10,000

Working Capital Unadjusted 180,000

Effect (overstated) (10,000)
Working Capital, 2017 170,000

3. D Net Income Retained Earnings

 2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
1. Insurance Expense under,
NI over, (30,000) (6,000) (30,000) (36,000)
2. Rev. under, NI under 20,000 10,000 20,000 30,000
3. Depreciation over, NI over 12,000 12,000 12,000
4. Repair Expense over, NI under 200,000 200,000
Depreciation under, NI over (50,000) (50,000) (50,000)
5. Other Income (20,000) (12,000)
Gain on Sale 8,000
6. Repairs Expense under, NI over (20,000) (20,000)
Depreciation 5,000 5,000 5,000
Adjusted Balance 325,000 119,000 325,000 366,000

4. A Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
1. Insurance Expense under,
NI over, (30,000) (6,000) (30,000) (36,000)
2. Rev. under, NI under 20,000 10,000 20,000 30,000
3. Depreciation over, NI over 12,000 12,000 12,000
4. Repair Expense over, NI under 200,000 200,000
Depreciation under, NI over (50,000) (50,000) (50,000)
5. Other Income (20,000) (12,000)
Gain on Sale 8,000
6. Repairs Expense under, NI over (20,000) (20,000)
Depreciation 5,000 5,000 5,000
Adjusted Balance 325,000 119,000 325,000 366,000
5. A
Working Capital Over or (under)
Prepaid Insurance overstated, WC Overstated 36,000
Unearned Rent Revenue overstated, WC understated (20,000)
Unearned Rent Revenue overstated, WC understated (10,000)
Effect (overstated) 6,000

Working Capital Unadjusted 260,000

Effect (overstated) (6,000)
Working Capital, 2017 254,000

6. C Net Income Retained Earnings

2017 2018 2017 2018
Unadjusted Balances 200,000 160,000 200,000 360,000
1. Insurance Expense under,
NI over, (30,000) (6,000) (30,000) (36,000)
2. Rev. under, NI under 20,000 10,000 20,000 30,000
3. Depreciation over, NI over 12,000 12,000 12,000
4. Repair Expense over, NI under 200,000 200,000
Depreciation under, NI over (50,000) (50,000) (50,000)
5. Other Income (20,000) (12,000)
Gain on Sale 8,000
6. Repairs Expense under, NI over (20,000) (20,000)
Depreciation 5,000 5,000 5,000
Adjusted Balance 325,000 119,000 325,000 366,000

7. Adjusting Entries
2017 Insurance Expense 30,000
 Prepaid Insurance 30,000
Unearned Rent Revenue 20,000
Rent Revenue 20,000
Accumulated Depreciation 12,000
Depreciation Expense 12,000
Building 200,000
Repair Expense 200,000
Depreciation Expense 50,000
Accumulated Depreciation 50,000
Other Income 20,000
Accumulated Depreciation 48,000
Equipment 60,000
Gain on Sale 8,000
Repairs Expense 20,000
Building 20,000
Accumulated Depreciation 5,000
Depreciation Expense 5,000
2018 Retained Earnings 30,000
Insurance Expense 6,000
Prepaid Insurance 36,000
Unearned Rent Revenue 10,000
Rent Revenue 10,000
Unearned Rent Revenue 20,000
Retained Earnings 20,000
Accumulated Depreciation 12,000
Retained Earnings 12,000
Building 200,000
Repairs Expense 200,000
Depreciation Expense 50,000
 Retained Earnings 50,000
Accumulated Depreciation 100,000
Retained Earnings 12,000
Accumulated Depreciation 48,000
Equipment 60,000
Retained Earnings 20,000
Building 20,000
Accumulated Depreciation 10,000
Retained Earnings 5,000
Depreciation Expense 5,000
2019 Retained Earnings 360,000
Prepaid Insurance 360,000
Unearned Rent Revenue 30,000
Retained Earnings 30,000
Accumulated Depreciation 12,000
Retained Earnings 12,000