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10 Problem 2-7 Adjusting entries and income effects [LO2-4, 2-5) The information necessary for preparing the 2018 year-end adjusting entries for Vitos Pizza Parlor appears below. Vitos fiscal year- end is December 31. nts On July 1, 2018, purchased $18,500 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 10%. a. eBook b. Vitos depreciable equipment has a cost of $5,200, a four-year life, and no salvage value. The equipment was purchased in 2016. Print The straight-line deprectation method is used. ferencesc. On November 1, 2018, the bar area was leased to Jack Donaldson for one year. Vitos recelved $8,100 representing the first six months rent and credited deferred rent revenue. On April 1, 2018, the company paid $1,560 for a two-year fire and liability insurance policy and debited insurance expense On October 1 2018, the company borrowed $13,000 from a local bank and signed a note. Principal and interest at 10% will be paid on September 30, 2019. d. e. f At year end, there is a $1,300 debit balance in the supplies (asset) account. Only $630 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries at December 31, 2018. Determine the amount by which net income would be misstated if Vitos failed to record these adjusting entries. (Ignore income tax expense.) Complete this question by entering your answers in the tabs below.
10 Van View transaction list View journal entry worksheet No Transaction General Journal Credit Interest receivable Interest revenue 925 points 925 b. Depreciationexpense 1,300 eBook Print References 1,300 c. Deferred rent revenue 2,700 Rent revenue 2,700 d. Prepaid insurance 975 Insurance expense 975 325 e. Interest expense 325 Interest payable 670 Supplies expense 670 Supplies Required 2>
Complete this question by entering your answers in the tabs below Required 1 Required 2 Determine the amount by which net income would be misstated ir Vitos falled to record these adjusting entries. (ignore ncome tax expense.) (Amounts to be deducted should be indicated by. a minus sian Do not round intermediate calculations.) points eBook Overstated Print Adjustments to revenues Understatement of interest expense Adjustments to expenses:
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Income Overstated (Understated) Adjustments to revenues: Understatement of interest revenue Understatement of rent revenue 925 2700 Adjustments to expenses: Overstatement of insurance expense Understatment of depreciation expense Understatment of interest expense Understatment of supplies expense 975 1300 325 670 Understatement of net income 2305Explanation: Interest expense ($18500.10%-6/12) Depreciation expense($5200*1/4) Rent revenue($8200*2/6) Insurance expense($1520 15/24) Interest expense( $13000*1096*3/12) Supplies expense($1300-$630) $925 $1,300 $2,700 $975 S325 $670

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