On June 30, 2013, the Esquire Company sold some merchandise to a customer for $3

Question

On June 30, 2013, the Esquire Company sold some merchandise to a customer for $30,000. In payment, Esquire agreed to accept a 6% note requiring the payment of interest and principal on March 31, 2014. The 6% rate is appropriate in this situation.

1)If the December 31 adjusting entry for the interest accrual is not prepared, by how much will income before income taxes be over- or understated in 2013 and 2014?

a) 2013 income before income tax would be understated by?

b) 2014 income before income tax would beoverstated by?

Explanation / Answer

On June 30, 2013, the Esquire Company sold some merchandise to a customer for $3

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