Problem related to prepaid insurance

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Reference no: EM13259274

On December 31, 2007, the Rift Music Store reported net incomeof 1,200 and the following account balances.

Cash 1,425

Accounts Receivable 2,300

Prepaid Insurance 1,200

Equipment and furnishings 3,200

Less: Accumulated depreciation (500)

Accounts Payable 1,300

Wages Payable 1,520

Owners equity (includes Net income of 1,200) 4,805

After the information was prepared, the bookkeeper discoveredthat he had forgotten to make two necessary adjusting entries forthe year and, therefore, they were not reflected in the balancesshown. Information concerning the two missing adjustingentries follows:

A. The prepaid insurance involves a 3-year fire insurancepolicy that was purchased (and went into effect) on January 1,2007. By the end of the year, apportion of the insurance policy had been used up.

B. The wages payable does not include the wages that wereowned at year-end to two workers who had been temporarily assignedto work off the premises. This amount totaled $375.

Use the following schedule; determine the correct year-endamount of (1) total assets, (2) total liabilities, (3) ownersequity, and (4) net income.

Reference no: EM13259274

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