Question

59%) Sat Sep 19 2:22 PM View History Bookmarks Tools Window Help Connect C Dog Potty Pads: Uns X 6 The employees of Po Pastina Company Se TESNORKEL YOUR ATV I https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchurl=hti Help Saved Submit Save & Exit oblems Check my work The information necessary for preparing the December 31, 2021 year-end adjusting entries for Vito's Pizza Parlor appears below. Vito's fiscal year-end Is December 31. a. On July 1, 2021, purchased $17,000 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%. b. Vito's depreciable equipment has a cost of $6,400, a four-year life, and no salvage value. The equipment was purchased in 2019. The straight-line depreciation method is used. c. On November 1, 2021, the bar area was leased to Jack Donaldson for one year. Vito's received $7,200 representing the first six months' rent and credited deferred rent revenue. d. On April 1, 2021, the company paid $1,920 for a two-year fire and liability insurance policy and debited insurance expense. e. On October 1, 2021, the company borrowed $16,000 from a local bank and signed a note. Principal and interest at 10% will be paid on September 30, 2022. f. At year-end, there is a $1,450 debit balance in the supplies (asset) account. Only $660 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries at December 31, 2021. 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. < Prev 6 of 6 !!! Next Highlight All Match Case Match Dlacritics Whole Words

Answer 1

41 Transaction Debit Credit 42 a 850 General Journal Interest Receivable (17000*10%*6/12) Interest Revenue (To record accrual of interest revenue) 43 850 44 45 46 b 1,600 47 Depreciation Expense (6400/4) Accumulated Depreciation (To record depreciation expense) 1,600 48 49 50 C 2,400 51 Deferred Rent Revenue (7200/6*2) Rent Revenue (To record rent earned during the year) 2,400 52 53 54 d 720 55 Prepaid Insurance (1920/2*9/12) Insurance expense (To record prepaid insurance) 720 56 57 58 e 400 59 Interest Expense (16000*10%*3/12) Interest Payable (To record accrued interest expense) 400 60

790 63 790 64 68 62 f Supplies expense (1450 - 660) Supplies (To record supplies consumed during the Year) 65 66 2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. 67 Income Overstated 69 (Understated) 70 Adjustments to Revenues; 71 Understatement of interest revenue 72 Understatement of rent revenue -2,400 Adjustments to expenses: Overstatement of insurance expense -720 75 Understatement of depreciation expense 1,600 Understatement of interest expense Understatement of supplies expense 790 78 Understatement of net income -1,180 79 -850 73 74 76 400 77 80