Assets, liabilities, S Equity
The Jamesway Corporation had the following situations on December 2013.
1.
On December 20, 2013, Jamesway received a $4,000 payment from a customer for services to be rendered early in 2014. Service revenue was credited.
2.
On December 1, 2013, the company paid a local radio station $2,000 for 40 radio ads that were to be aired, 20 per month, throughout December and January. Prepaid advertising was debited.
3. Employee salaries for the month of December totaling $16,000 will be paid on January 7, 2014.
4.
On August 31, 2013, Jamesway borrowed $60,000 from a local bank. A note was signed with principal and 8% interest to be paid on August 31, 2014.
If none of the adjusting journal entries were made, would assets, liabilities, and shareholders’equity on the 12/31/13 balance sheet be higher or lower and by how much?
Assets, Liabitlities, S Equity
Thank you @pready... your help is greatly appreciated. Below is you answer to my question I posted earlier titled the same. Here's my answer to you hint. See below
1. Service Revenue is overstated and Unearned Service Revenue is understated by $4,000
2. Advertising Expense is understated and Prepaid Advertising is overstated by $1,000
3. Salaries Expense is understated and Salaries Payable is understated by $16,000
4. Interest Expense is understated and Interest Payable is understated by the amount that is equal to $60,000 times 8% times 4 months divided by 12 months
Every transaction will affect Owners Equity because of net income and net income is affected by revenues and expenses.
You now have all the information needed to solve your problem. You just need to figure out what these accounts affect and they are affected. For Example number 1 service revenue would affect owners equity and unearned service revenue would affect liabilities. Onwers Equity would be overstated and Liabilities would be understated.
Assets overstated by $1000
Liabilities under by $21600
Equity over by $4000
Are these all correct? Thanks
