Effects of Omitting Adjustments For the year ending April 30, Safeguard Medical Services Co. mistakenly omitted adjusting entries for (1) $1,700 of supplies that were used, (2) unearned revenue of $8,000 that was earned, and (3) insurance of $10,900 that expired. Indicate the effect of the errors on (a) revenues, (b) expenses, and (c) net income for the year ended April 30. (a) Revenues understated ✓ (b) Expenses understated (c) Net income overstated

For the Year Ended December 31 Premium revenue Estimated claims Underwriting income. Underwriting income as a percent of premium revenue Activity New policy processing Cancellation processing Claim audits Claim disbursements processing Premium collection processing Number of new policies Number of canceled policies Number of audited claims Number of claim disbursements Number of premiums collected Auto $5,800,000 (4,060,000) $1,740,000 Management is concerned that the administrative xpenses may make some of the insurance lines nprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Auto Premium revenue Estimated claims Underwriting income Administrative activities: New policy processing 1,330 490 390 470…

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Analysis of Receivables Method At the end of the current year, Accounts Receivable has a balance of $790,000; Allowance for Doubtful Accounts has a debit balance of $7,000; and sales for the year total $3,560,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $37,800. a. Determine the amount of the adjusting entry for uncollectible accounts. b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Accounts Receivable Allowance for Doubtful Accounts Bad Debt Expense c. Determine the net realizable value of accounts receivable.

In order to generate interim financial reports that contain a reasonable portion of annual expenses, which of the following statements is true? a. an allocation of a portion of an annual bonus would be made as an interim adjustment b. any adjustments for inventory shrinkage would be deferred to year end c. the allowance for uncollectible accounts receivable will be revised at year end d. None of the above are true