First, you adjust the balance sheet accounts to the amounts they should be based on info provided. The trick is to decide where the other side of the entry goes: either to current year income and expense (2008) or to a prior accounting period.

(a) 1. Supplies is $2700 and should be $1100. You credit supplies for $1600 and can safely assume that the debit goes to supplies expense.

(a) 2. The narrative tells you that the entry to be made will all be 2008 expense. They don't say that the prior year was wrong and therefore the change happened during 2008. Accrued wages was $1500 at the beginning of the year, and you will have to make a credit entry of $2900 to the liability account to raise it to $4400. The offsetting debit goes to salaries expense.

(a) 3. The change to interest receivable is $750. Lower the asset with a credit and debit interest income (not interest expense). You go to the income account because interest receivable arose from an income account, not an expense account.

(a) 4. Prepaid insurance must be lowered by (90,000-65,000) $25000. Credit the asset account and debit insurance expense.

(a) 5. In this instance, revenue is overstated because we should not have two years of rental income in 2008. The second part is that we would owe the 2009 portion back to payer until we earn it. Therefore, we reduce rental income with a debit and credit the unearned rent account (a liability account).

(a) 6. What was the original entry we need to correct? Debit depreciation expense and credit accumulated depreciation for $5000. They don't give us a sample contra asset account, but it is a balance sheet account. You need only make the same entry again for $45000 to bring the balances right.

(a) 7. Here's another depreciation entry, but they tell us it is not for 2008. The account titled prior period adjustment is a balance sheet account in the equity section. Debit or credit? It should be a debit because we have unrecorded expense in a prior period. The credit? The same as 6. above.

(b) "the books have been closed" means that we are in some later accounting period, not 2008. This might be the situation when a CPA firm give entries back to a client in March that affect the prior year. For all of your entries above that hit some account on the 2008 income statement (either income or expense), you must change that account to an equity account. Remember that income statement accounts are all closed into equity - either retained earnings or owners' equity. Since they tell us that Hartsack is a corporation, retained earnings is the proper equity account.