North Star prepared the following unadjusted trail balance at the end of its second year of operation ending December 31, 2012
Account Title Debit Credit
Cash $12,000
Account Receivable 6,000
Prepaid Rent 2,400
Equipment 21,000
Accumulated Depreciation $1,000
Account Payable 1,000
Utilities payable 0
Income tax payable 0
Contributed Capital 24,800
Retained earning 2,100
Sale revenue 50,000
Wage expense 25,000
Utilities expense 12,500
Rent expense 0
Depreciation expense 0
Income tax expense 0
Total $78,900 $78,900
Other data not yet record 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
Required:
1. Using the format show in the demonstrate case, indicate the accounting equation effects of each requirement adjustment.
2. Prepare the adjusting journal entries require at December 31,2012
3. Summarize the adjusting journal in T accounts. After entering the beginning balances and computing the adjusted ending balances, prepare an adjust trail balance as of December 31,2012
4. Compute the amount of net income using (a) the preliminary (unadjusted) numbers, and (b) the final (adjusted) numbers. Has the adjusting entries not been recorded, Would net income have been overstated or understate, and be what amount?