Solved: Hentzel Landscaping commenced its business on January 1 2017 1 During
Hentzel Landscaping commenced its business on January 1 2017 1 During
Hentzel Landscaping commenced its business on January 1, 2017.
1. During the first year of its operations, Hentzel purchased supplies in the amount of $12,000 (debited to Supplies inventory), and of this amount, $3,000 were unused as of December 31, 2017.
2. On March 1, 2017, Hentzel received $18,000 for landscaping services to be rendered for 18 months (beginning July 1, 2017). This amount was credited to a liability called Deferred landscaping revenue.
3. The company’s gasoline bill for $2,500 for the month of December 2017 was not received until January 15, 2018. No entry was made.
4. The company borrowed $50,000 from HomeTown Financing on April 1, 2017, at a 12% interest rate per annum. It credited a liability for notes payable. The principal, along with all the interest, is due on April 1, 2018.
5. On January 1, 2017, the company purchased 10 lawnmowers at $3,000 per unit. It debited fixed assets. The lawnmowers are expected to last for three years with no salvage value.
On December 31, 2017, Hentzel did not record any adjusting entries with respect to these transactions.
Required:
Using the following table format, show the effect of the omission of each year-end adjusting entry on the following. (Indicate both the amount and the direction of the effect.) Use OS for overstated, US for understated, and NE for no effect. Ignore income taxes.
Item Number Assets Liabilities Net Income
Direction of effect
Dollar amount of effect
Hentzel Landscaping commenced its business on January 1 2017 1 During
