Question

3. On November 30, a desk was purchased for $2,200. The desk has a seven year useful life, no salvage value. For the adjusting journal entry (if there is one) the effect on each of the following of not recording the adj entry is: [Write O (Overstates), U (Understates), or NE (No Effect) next to each account type.] Asset: Liability: Revenue: Expense: Net Income:

Answer 1

3.the actual adjusting entry should have been :

date	accounts	debit	credit
dec 31	Depreciation expense a/c	$26.19
	......................To Accumulated depreciation - desk a/c		$26.19
	(amount = $2200 / 7 years * 1 month / 12 month =>$26.19)

if recorded this entry will increase expense and reduce net income and asset accounts.

If not recorded the following table shows the affect:

.

asset	Overstates
liability	No Effect
Revenue	No Effect
Expense	Understates
NetIncome	Overstates