Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 24

Recording Four Adjusting Journal Entries and Preparing an Adjusted Trial Balance
Mint Cleaning Inc. prepared the following unadjusted trial balance at the end of its second year of operations ending December 31, 2013. To simplify this exercise, the amounts given are in thousands of dollars.

Other data not yet recorded at December 31, 2013:
a. Insurance expired during 2013, $5.
b. Depreciation expense for 2013, $4.
c. Wages payable, $7.
d. Income tax expense, $9.
Required:
1. Prepare the adjusting journal entries for 2013.
2. Using T-accounts, determine the adjusted balances in each account and prepare an adjusted trial balance as of December 31, 2013.
3. By what amount would net income have been understated or overstated had the adjusting journal entries not been recorded