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Unformatted text preview: Prepaid insurance 2,500 Cash 2,500 No effect Cash 22,000 Unearned Revenue 22,000 No effect Rent expense 2,000 Cash 2,000 Decrease net income Unearned revenue 22,000 Revenue 22,000 Increase net income ADJUSTING JOURNAL ENTRIES Supplies expense 8,000 Supplies 8,000 Decreases net income Wage expense 4,600 Wages payable 4,600 Decreases net income Insurance expense 208 Prepaid Insurance 208 Decreases net income Problem 3 FIFO Units available for sale: BI = 2,000 units, Purchases = 4,000 units Therefore, if 6,000 were available for sale and 3,500 were sold – 2,500 are left in ending inventory. 2,000 * $1.02 + 500 units * $1.05 = $2,565 Weighted average $6,190/6,000 units = $1.03 per unit 2,500 units * $1.03 = $2,575 Net income would be higher under the Weighted Average method. This is because EI is higher under this method, meaning cost of goods sold would lower. COGS reduces net income....
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