Problem 4-1A (Page 216)

Part 1) Journal Entries

Date Accounts Debit ($)

Dec 31, 2012 Depreciation Expense 3,000
Accumulated Depreciation
(Office Furniture)

Dec 31, 2012 Supply Expense 13,200

Supplies

Dec 31, 2012 Customer Deposit 6,600

Revenue

Dec 31, 2012 Rent Expense 16,000

Prepaid Rent

Dec 31, 2012 Interest Expense 301

Outstanding Interest

Dec 31, 2012 Wages & Salaries Expense 1,660

Wages & Salaries Payable

Part 2) Impact on Income Statement if adjusting entries were not taken into consideration:

Revenue
Increase in Revenue 6,600
Total Revenue 6,600
Expenses
Supply Expense 13,200
Depreciation Expense 3,000
Rent Expense 16,000
Interest Expense 301
Salary Expense 1,660
Total Expenses 34,161

Net Income -27,561

 Credit ($)

3,000

13,200

6,600

16,000

301

1,660

Conclusion: Net Income is currently overstated by $27,561