David Smith owns a car hiring business operating under the name Go Drive. The unadjusted trial balance of Go Drive at 31 May 2020 is shown below (ignore GST).

Go Drive

Trial Balance

As at 31 May 2020

Account Debit Credit
Cash at bank 48,825
Accounts receivable 54,600
Fuel supplies 8,460
Prepaid advertising 5,970
Prepaid insurance 5,400
Office Furniture 24,000
Motor vehicles 862,500
Accumulated Depreciation – Vehicle 165,000
Accounts payable 31,200
Accrued interest 4,500
Unearned revenue 33,390
Loan payable 283,000
David S., Capital 423,010
David S., Drawings 60,900
Car hire revenue   299,200
Wages expense 122,430  
Fuel and oil expense 23,520
Electricity expense 15,000
Mis. Expenses 7,695
1,239,300 1,239,300


The entity prepares financial statements every month. The information below is provided for the month of May:


  1. Motor vehicles are depreciated 8% each year. No residual values. Straight-line method is used.
  2. Prepaid advertising has a balance of $2,400 at the end of the month.
  3. A physical count showed supplies totalling $2,010 were still on hand at 31 May.
  4. Prepaid insurance which covers 2 years was purchased on 1 May 2020.
  5. The balance in the unearned revenue account includes $5,400 received in April for car hiring services provided in May.
  6. Bank loan was borrowed on 1 January 2020. Interest is to be paid at the end of each year (31 December). Interest on bank loan is 5% per annum.
  7. Owed part time employees wages $2,100.
  8. Office furniture was purchased at the beginning of May in 2020. It will be depreciated over a useful life of 15 years at which time it is expected to have a residual value of $2,400

a) Prepare necessary adjusting entries.
b) What would be the impacts to the financial statements if the accountant of the entity forgot to make the above adjustments?

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