Cash $ 23800 Debit (As reported on bank statement),Supplies 300 Debit (only $200 of supplies still exist)
Unearned revenue $1500 credit (Of this amount, $500 was received for December lessons and $1000 for January lessons Wages payable 0 Credit (The employee was paid $500 for 10 days of work through December 28. She has not yet been paid for work on December 29 and 30)
Income tax payable 0 credit(The company has paid last year's last year's income taxes but not this year's taxes),Interest payable 0 credit(The company has not paid the $100 of interest owed on its note payable for the current period)
Note payable 12000 credit(This one year note was taken out this year on December 1)Contributed capital 1000 credit ( This amount was contributed to the company in prior years)Retained earnings 3000 credit( This is the balance reported at the end of last year)
lesson revenue 25500 credit (Most customers pay cash for lessons each time they are provided but some customers paid in advance) wages expense 18100 debit (The company's employees worked through December 30 but did not work on Dec 31) Supplies expense 800 debit ( This is the cost of supplies used through November 30) Interest 0 debit ( The company has not paid the $100 of interest owed on its note payable for the current period) Income tax expense 0 debit ( The company has an average tax rate of 30 percent)
Totals= $43000 $43000
Require:
1) Calculate the preliminary unadjusted net income for the year ended December 31, 2010
2)Prepare the adjusting journal entries that are required at December 31, 2010
3) Calculate the adjusted net income that the company should report for the year ended December 31, 2010. By how much did the adjustments in requirement (4) cause net income to increase or decrease.