Chat with us, powered by LiveChat Adjusting Entries Annual AdjustmentsPalmer Industr - Writemia

Adjusting Entries Annual AdjustmentsPalmer Industr

Adjusting Entries Annual AdjustmentsPalmer Industries prepares annual financial statements and adjusts its accounts only at the end ofthe year. The following information is available for the year ended December 31, 2008:a. Palmer purchased computer equipment two years ago for $15,000. The equipment has an estimateduseful life of five years and an estimated salvage value of $250.b. The Office Supplies account had a balance of $3,600 on January 1, 2008. During 2008, Palmeradded $17,600 to the account for purchases of office supplies during the year. A count of thesupplies on hand at the end of December 2008 indicates a balance of $1,850.c. On August 1, 2008, Palmer credited a liability account, Customer Deposits, for $24,000. Thissum represents an amount that a customer paid in advance and that will be earned evenly byPalmer over a six-month period.d. Palmer rented some office space on November 1, 2008, at a rate of $2,700 per month. On thatdate, Palmer debited Prepaid Rent for three months’ rent paid in advance.e. Palmer took out a 120-day, 9%, $200,000 note on November 1, 2008, with interest and principalto be paid at maturity.f. Palmer operates five days per week with an average daily payroll of $500. Palmer pays itsemployees every Thursday. December 31, 2008, is a Wednesday.Required1. For each of the preceding situations, prepare in general journal form the appropriate adjustingentry to be recorded on December 31, 2008.2. Assume that Palmer’s accountant forgets to record the adjusting entries on December 31, 2008.Will net income for the year be understated or overstated? by what amount? (Ignore the effectof income taxes.)

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