An accountant made the following adjustments at December 31, the end of the acco

Question

An accountant made the following adjustments at December 31, the end of the accounting period:

a. Prepaid insurance, beginning, $700. Payments for insurance during the period, $2,100. Prepaid insurance, ending, $800.

b. Interest revenue accrued, $900.

c. Unearned service revenue, beginning, $800. Unearned service revenue, ending $300

d. Depreciation, $6,200.

e. Employees' salaries owed for three days of a five-day work week; weekly payroll, $9,000.

f. Income before income tax, $20,000. Income tax rate is $25%.

Requirements

1. Journalize the adjusting entries.

2. Suppose the adjustments were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments.

-Thanks

Explanation / Answer

A.)
Debit Insurance Expense 800.
Credit Prepaid Insurance 800.

B.)
Debit Interest Receivable $900.
Credit Interest Revenue

C.)
Debit Unearned Revenue 500
Credit Revenue 500

D.)
Debit Depreciation Expense 6,200
Credit Accumulated Depreciation 6,200

E.)
Debit Salary expense $$9,000.
Credit Salary Payable $$9,000.

F.)
Debit Income Tax Expense 5,000
Credit Income Tax Payable 5,000

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