Question

Mint Cleaning Inc. prepared the following unadjusted trial balance at the end of its second year of operations ending December 31. (Assume amounts are reported in thousands of dollars.) Account Titles Debit Credit Cash $ 52 Accounts Receivable 14 Prepaid Insurance 9 Equipment 108 Accumulated Depreciation $ 0 Accounts Payable 14 Common Stock 104 Retained Earnings 17 Sales Revenue 112 Insurance Expense 0 Salaries and Wages Expense 24 Supplies Expense 40 Totals $ 247 $ 247 Other data not yet recorded at December 31: Insurance expired during the year, $7. Depreciation expense for the year, $6. Salaries and wages payable, $9. Income tax expense, $11. By what amount would net income have been understated or overstated had the adjusting journal entries not been recorded? (Enter your answers in thousands of dollars.)

Answer 1

Answer:

It will be overstated for 33 dollars.

Explanation:

We will check what effect each adjustment has on the net income

Adjusting entries effect:

exipred insurance                   (7) (expense)

Depreciation                           (6) (expense)

Accrued salaries and wages (9) (expense)

Income tax expense             (11) (expense)

           Total effect:               (33)

The adjusting entries would reduce the net income by 33

So, not include the adjusting entries will generate an overstated net income for 33 dollars.