E3-19A. (Learning Objectives 1, 3: Explain how accrual accounting differs from cash-basisaccounting; adjust the accounts) An accountant made the following adjustments atDecember 31, the end of the accounting period:a. Prepaid insurance, beginning, $500. Payments for insurance during the period, $2,000.Prepaid insurance, ending, $400.b. Interest revenue accrued, $2,500.c. Unearned service revenue, beginning, $1,700. Unearned service revenue, ending, $300.d. Depreciation on building, $5,600.e. Employees’ salaries owed for two days of a five-day work week; weekly payroll, $19,000.f. Income before income tax, $21,000. Income tax rate is 35%.Requirements1. Journalize the adjusting entries.2. Suppose the adjustments were not made. Calculate the overall overstatement or understatement of net income resulting from the omission of these adjustments.
E3-19A. (Learning Objectives 1, 3: Explain how accrual accounting differs from cash-basis
accounting; adjust the accounts) An accountant made the following adjustments at
December 31, the end of the accounting period:
a. Prepaid insurance, beginning, $500. Payments for insurance during the period, $2,000.
Prepaid insurance, ending, $400.
b. Interest revenue accrued, $2,500.
c. Unearned service revenue, beginning, $1,700. Unearned service revenue, ending, $300.
d.
e. Employees’ salaries owed for two days of a five-day work week; weekly payroll, $19,000.
f. Income before income tax, $21,000. Income tax rate is 35%.
Requirements
1. Journalize the
2. Suppose the adjustments were not made. Calculate the overall overstatement or understatement of net income resulting from the omission of these adjustments.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 5 images
