The accountant for Astaire Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries

The accountant for Astaire Medical Co., a medical services consulting firm, mistakenly omitted adjusting entries for (a) unearned revenue earned during the year ($23,250) and (b) accrued wages ($4,000). Indicate the effect of each error, considered individually, on the income statement for the current year ended August 31. Also indicate the effect of each error on the August 31 balance sheet. Set up a table similar to the following, and record your answers by inserting the dollar amount in the appropriate spaces. Insert a zero if the error does not affect the item.


Error (a) Error (b) Overstated Understated Overstated Understated 1. Revenue for the year would be $ ____ $ ____ $ ____ $ ____ 2. Expenses for the year would be $ ____ $ ____ $ ____ $ ____ 3. Net income for the year would be $ ____ $ ____ $ ____ $ ____ 4. Assets at August 31 would be $ ____ $ ____ $ ____ $ ____ 5. Liabilities at August 31 would be $ ____ $ ____ $ ____ $ ____ 6. Owner’s equity at August 31 would be $ ____ $ ____ $ ____ $ ____

Answer:


Error (a) Error (b) Over- stated Under- stated Over- stated Under- stated 1.  Revenue for the year would be……………… $ 0 $23,250 $ 0 $ 0 2.  Expenses for the year would be…………….. 0 0 0 4,000 3.  Net income for the year would be…………...  0 23,250 4,000 0 4.  Assets at August 31 would be………………. 0 0 0 0 5.  Liabilities at August 31 would be…………… 23,250 0 0 4,000 6.  Owner’s equity at August 31 would be……. 0 23,250 4,000 0