Question : 97. Entries for the following items were either omitted or recorded : 1230497

97. Entries for the following items were either omitted or recorded incorrectly in preparing the financial statements for Year 4. Indicate the amount and nature [understatement (U), overstatement (O), no effect (N)] of the effect of the omission on total assets, total liabilities, and net income for Year 4. Ignore income tax effects. Use the following format: 

Total Assets

Total Liabilities

Net Income

a.

The company received a payment of $4,600 from a customer for an order that the company has not yet produced. It credited the $4,600 to sales revenue.

b.

The company failed to record a dividend of $5,000 that was declared but not yet paid.

c.

The company repaid a loan of $5,000 to the bank. It recorded the transaction in the appropriate accounts but in the amount of $50,000. The company has accounted for all interest on the loan correctly.

d.

The ending balance of finished goods inventory was incorrectly recorded at $4,000 more than its proper balance due to a mistake in taking a physical inventory.

e.

The company correctly entered a stock issue of $22,000 on December 31, Year 4, in the cash account but mistakenly credited it to Bonds Payable.

f.

On the basis of an incorrect report from the company’s credit collection agency, specific accounts receivable of $2,700 were written off, but are actually expected to be collectible accounts. The company correctly made a provision for estimated uncollectible accounts for year 4.

98. Entries for the following items were either omitted or recorded incorrectly in preparing the financial statements for Year 3. Indicate the amount and nature [understatement (U), overstatement (O), no effect (N)] of the effect of the omission on total assets, total liabilities, and net income for Year 3. Ignore income tax effects. Use the following format: 

Total Assets

Total Liabilities

Net Income

a.

On December 1, Year 3, a firm debits Prepaid Rent (Advances to Car Rental Agency) for $600 for 6 months’ rent on an automobile. The firm has neglected to make the adjusting entry on December 31.

b.

A firm debits Administrative Expenses for $6,000 for a microcomputer acquired on July 1, Year 3. The microcomputer has an expected useful life of 3 years and zero estimated salvage value.

c.

A firm rents out excess office space for the 6-month period beginning January 1, Year 3. It received the rental check for this period of $600 on December 26, Year 2, and correctly credited Advances from Tenants. It made no further journal entries during Year 3.

d.

Interest on Notes Receivable of $500 had accrued by December 31, Year 3, but the firm overlooked making an entry to record this interest.

e.

A firm receives a check for $250 from a customer on December 31, Year 3, in settlement of an account receivable. The firm recorded this entry with a credit to Sales.

f.

A firm records as $470 an expenditure of $740 for travel during December, Year 3.