Owners equity on december 31 morris company receives

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Owner's Equity:On December 31, Morris Company receives a utility bill in the mail for $830. Morris Company intends to pay the bill in early January of next year. If the appropriate adjusting entryis not made at the end of the year, what will be the effect on: (a) Income statementaccounts (overstated, understated, or no effect)?(b) Net income(overstated, understated, or no effect)?(c) Balance sheetaccounts (overstated, understated, or no effect)?OverstatedEXPLANATIONTo answer this question correctly, first write down the "appropriate adjusting entry." If you are not sure how to do that, review the dictionary link for adjusting entry.Each adjusting entry affects at least 2 accounts - an income statement account (revenue/expense) and a balance sheet account (asset/liability). If adjusting entries are not made, there will be overstatements and understatements in the financial statements.For example, the adjusting entry relating to Prepaid Insurance debits (increases) Insurance Expense and credits (decreases) Prepaid Insurance. Failing to make and post this adjusting entry will have the effect of understating Expenses (Insurance Expense) and, therefore, overstating Net Income. Prepaid Insurance would be overstated.In accrual accounting, expenses are recorded when incurred, not necessarily when paid.Since the utility bill was for December, the utilities expense should be recorded in December in an adjusting entry on December 31. The adjusting entry will be: DateAccount TitleDebitCreditDec.31Utilities Expense830Utilities Payable830Income statement accounts: If the adjusting entry is ignored, Utilities Expense will beunderstated. Revenues will not be involved.Net income: If Utilities Expense is understated, then Net Income will be overstated. (Choose one)(Choose one)(Choose one)(Choose one)
Balance sheet accounts: If the adjusting entry is ignored, assetswill have no effect. Liabilities(Utilities Payable) will be understated. Owner's Equitywill be overstated (due to Utilities Expense being understated, therefore causing Net Income to be overstated.) ANSWERIncome Statement AccountsRevenue:Expense:Net Income:Balance Sheet AccountsAssets:Liabilities:Owner's Equity:By the end of December, Cooper Company has completed work of $4,100. Cooper company has neither billed the clients nor recorded any of the revenue. If the appropriate adjusting entryis not made at the end of the year,what will be the effect on: (a) Income statementaccounts (overstated, understated, or no effect)?(b) Net income(overstated, understated, or no effect)?(c) Balance sheetaccounts (overstated, understated, or no effect)?EXPLANATIONTo answer this question correctly, first write down the "appropriate adjusting entry." If you are not sure how to do that, review the dictionary link for adjusting entry.

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