On December 31, 2004, the Washington Music Store reported net income of $1,500 and the following account balances.
|
Cash |
$1,375 |
|
Accounts receivable |
2,100 |
|
Prepaid insurance |
900 |
|
Equipment & furnishings |
3,225 |
|
Less: Accumulated depreciation |
500 |
|
Accounts payable |
1,100 |
|
Wages payable |
1,080 |
|
Owners’ equity |
4,920 |
After this information was prepared, the bookkeeper discovered that he had forgotten to make two necessary adjusting entries for the year and, therefore, they were not reflected in the balances shown. Information concerning the two missing adjusting entries follows:
a. The prepaid insurance involves a 3 year fire insurance policy that was purchased (and went into effect) on January 1, 2004. By the end of the year, a portion of the insurance policy had been used up.
b. The wages payable does not include the wages that were owed at year end to two workers who had been temporarily assigned to work off the premises. This amount totaled $450.
Using the following schedule, determine the correct year end amount of (1) total assets, (2) total liabilities, (3) owners’ equity, and (4) net income.
|
Assets |
Liabilities |
Equity |
Net Income |
|
|
Year end amounts before correction |
||||
|
Adjusting entry (a): |
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|
Adjusting entry (b): |
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|
Year end corrected amounts |
$ |
$ |
$ |
$ |