The information necessary for preparing the December 31, 2024, year-end adjusting entries for Vito's Pizza Parlor appears below. a On July 1, 2024, purchased $14,500 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1 The annual interest rate is 12%. b. Vito's depreciable equipment has a cost of $34,500, a five-year life, and no salvage value. The equipment was purchased in 2022 The straight-line depreciation method is used. c. On November 1, 2024, the bar area was leased to Jack Donaldson for one year. Vito's received $8,700 representing the first six months rent and credited deferred rent revenue at the time cash was received. d. On April 1, 2024, the company paid $3,480 for a two-year fire insurance policy and debited prepaid insurance at the time of the payment e On October 1, 2024, the company borrowed $29,000 from a local bank and signed a note. Principal and interest at 12% will be paid on September 30, 2025. 1. At year-end, there is a $2,250 debit balance in the supplies (asset) account. Only $790 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries on December 31, 2024. 2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax expense.)
The information necessary for preparing the December 31, 2024, year-end adjusting entries for Vito's Pizza Parlor appears below. a On July 1, 2024, purchased $14,500 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1 The annual interest rate is 12%. b. Vito's depreciable equipment has a cost of $34,500, a five-year life, and no salvage value. The equipment was purchased in 2022 The straight-line depreciation method is used. c. On November 1, 2024, the bar area was leased to Jack Donaldson for one year. Vito's received $8,700 representing the first six months rent and credited deferred rent revenue at the time cash was received. d. On April 1, 2024, the company paid $3,480 for a two-year fire insurance policy and debited prepaid insurance at the time of the payment e On October 1, 2024, the company borrowed $29,000 from a local bank and signed a note. Principal and interest at 12% will be paid on September 30, 2025. 1. At year-end, there is a $2,250 debit balance in the supplies (asset) account. Only $790 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries on December 31, 2024. 2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax expense.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:S
The information necessary for preparing the December 31, 2024, year-end adjusting entries for Vito's Pizza Parlor appears below.
a. On July 1, 2024, purchased $14,500 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and
July 1. The annual interest rate is 12%.
b. Vito's depreciable equipment has a cost of $34,500, a five-year life, and no salvage value. The equipment was purchased in 2022.
The straight-line depreciation method is used.
c On November 1, 2024, the bar area was leased to Jack Donaldson for one year. Vito's received $8,700 representing the first six
months' rent and credited deferred rent revenue at the time cash was received.
d. On April 1, 2024, the company paid $3,480 for a two-year fire insurance policy and debited prepaid insurance at the time of the
payment
e On October 1, 2024, the company borrowed $29,000 from a local bank and signed a note. Principal and interest at 12% will be paid
on September 30, 2025.
f. At year-end, there is a $2,250 debit balance in the supplies (asset) account. Only $790 of supplies remain on hand.
Required:
1. Prepare the necessary adjusting journal entries on December 31, 2024.
2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax
expense.)
Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Adjustments to revenues:
Adjustments to expenses:
siguta
Income
Overstated
(Understated)
< Required 1
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education