Suppose the adjustments were not made. Compute the overall overstatement or understatement of net…

(Learning Objective 1, 3: Journalizing adjusting entries and analyzing their effects on net income; accrual versus cash basis) 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 3 days of a 5-day work week; weekly payroll, $9,000.

f. Income before income tax, $20,000. Income tax rate is 40%.

Required

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.

"Is this question part of your assignment? We can help"

ORDER NOW