Reference no: EM131248197
Recording Adjusting Entries and Preparing an Adjusted Trial Balance: North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31, 2012. Cash- Debit $12,000 Credit- -. Accounts Receivable- Debit- $6,000 Credit--. Prepaid Rent- Debit- $2,400 Credit--. Equipment- Debit- $21,000 Credit--. Accumulated Depreciation - Debit-- Credit- $1,000. Accounts Payable - Debit - Credit- $1,000. Utilities Payable - - Credit- 0. Income Tax Payable - Debit - Credit- 0. Contributed Capital - Debit -- Credit - $24,800. Retained Earnings- Debit-- Credit- $2,100. Sales Revenue- Debit-- Credit- $50,000. Wages Expense- Debit- $25,000 Credit--. Utilities Expense- Debit $12,000 Credit--. Rent Expense- Debit-0 Credit--. Depreciation Expense- Debit- 0 Credit--. Income Tax Expense- Debit- 0 Credit--. Totals Debit- $78,900 Credit- $78,900. Other data not yet recorded at December 31, 2012: a. Rent expired during 2012, $1,200. b. Depreciation expense for 2012, $1,000. c. Utilities payable, $9,000. d. Income tax expense, $390. Indicate the accounting equation effects of each required adjustment. 1. Prepare the adjusting journal entries required at December 31, 2012. 2. Summarize the adjusting journal entries in T-accounts. After entering the beginning balances and computing the adjusted ending balances, prepare an adjusted trial balance as of December 31, 2012. 3. Compute the amount of net income using (a) the preliminary (unadjusted) numbers, and (b) the final (adjusted) numbers. Had the adjusting entries not been recorded, would net income have been overstated or understated, and by what amount?
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