Chapter 3, Problem 3.21EX

To determine

Adjusting entries

Adjusting entries are those entries which are made at the end of the accounting period, to record the revenues in the period of which they have been earned and to record the expenses in the period of which have been incurred, as well as to update all the balances of assets and liabilities accounts on the balance sheet, and to ascertain accurate amount of net income (loss) on the income statement to maintain the records according to the accrual basis principle.

Accrued Expenses

Accrued expenses are the expenses which are incurred but not yet paid in a particular accounting period. They are payables for the business. Business treats accrued expense as a liability.

The net income before income taxes of the Company C, if the adjusting entry for accrued expenses is not recorded.