Qusetion: Journalizing adjusting entries and identifying the impact on financial statements Taylor Fishing Charters has collected the following data for the December 31 adjusting entries:
a. The company received its electric bill on December 20 for $225 but will not pay it until January 5. (Use the Utilities Payable account.)
b. Taylor purchased a nine-month boat insurance policy on November 1 for $9,000. Taylor recorded a debit to Prepaid Insurance.
c. As of December 31, Taylor had earned $2,000 of charter revenue that has not been recorded or received.
d. Taylor's fishing boat was purchased on January 1 at a cost of $44,500. Taylor expects to use the boat for five years and that it will have a residual value of $4,500. Determine annual depreciation assuming the straight-line depreciation method is used.
e. On October 1, Taylor received $8,000 prepayment for a deep-sea fishing charter to take place in December. As of December 31, Taylor has completed the charter.
Requirements: 1. Journalize the adjusting entries needed on December 31 for Taylor Fishing Charters. Assume Taylor records adjusting entries only at the end of the year.
2. If Taylor had not recorded the adjusting entries, indicate which specific category of accounts on the financial statements would be misstated and if the misstatement is overstated or understated. Use the following table as a guide.