For the year ending August 31, Solstice Medical Co. mistakenly omitted adjusting entries for (1) depreciation of $8,400, (2) fees earned that were not billed of $64,400, and (3) accrued wages of $10,600. Indicate the effect of the errors on (a) revenues, (b) expenses, and (c) net income for the year ended August 31.

Solstice Medical Co.

For the year ended August 31:

Effects of Omissions on  (a) revenues   (b) expenses    (c) net income

(1) depreciation of                                           $8,400             ($8,400)          

(2) fees earned not billed    $64,400                                      64,400

(3) accrued wages of                                   $10,600              (10,600)

Net   effect                         +$64,400        +$19,000          +$45,400

Explanation:

a) Data and Analysis of Omitted Adjusting Entries:

(1) depreciation of $8,400: increase expenses and reduce net income

(2) fees earned that were not billed of $64,400: increase revenue and net income

(3) accrued wages of $10,600: increase expenses and reduce net income

option D = $2,250 underapplied

Explanation:

There will not be the need to use all the parameters mention in the question above in order to determine the value of the balance in the factory overhead account. The following information and parameters are needed in order to solve this problem. Thus, without mincing words let's dive straight into the solution to the question above:

=> Materials A, B, and C and supplies were requisitioned from the stores clerk  = $4,000, Factory paychecks for that month = $65,250, Indirect labor = $6,250, Variable Factory Overhead Charges that occurred on the account = $32,625 and  Depreciation of factory equipment for the month = $6,500.

=> Job 406, material X = $5,250.

The balance in the factory overhead account = 4,000 + 6,250 + 32,625 + 6,500 = $49,375.

The next thing to do is to determine the value for the Applied Manufacturing Overhead. This can be calculated below as:

= [5,200 + 5,800 + 3,500] × 3.25 = $47,125 = Applied Manufacturing Overhead

Therefore, $49,375 - $47,125  = $2250. This value is the value for the overhead that is underapplied.