Question

The information necessary for preparing the 2018 year end adjusting entries for Vito's Pizza Parlor appears below. Vito's fiscal year end is December 31 a. On July 1, 2018, purchased $12.000 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 11%. b. Vito's depreciable equipment has a cost of $38.400, a sikyear life, and no salvage value. The equipment was purchased in 2016. The straight-line depreciation method is used c on November 1, 2018, the bar area was leased to Jack Donaldson for one year, ito's received $7,200 representing the frst six months rent and credited deferred rent revenue d. On April 1, 2018, the company paid $2.880 for a two-year fire and liability insurance policy and debited insurance expense. e. On October 1. 2018, the company borrowed $24,000 from a local bank and signed a note. Principal and interest at 11% wil be paid on September 30. 2019. f At year-end, there is a $2.000 debit balance in the supplies (asset) account. Only $740 of supplies remain on hand Required: 1. Prepare the necessary adjusting journal entries at December 31, 2018. 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. Required 1 Required 2 Prepare the necessary adjusting journal entries at December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations.) Journal entry worksheet HP Support 1-300-490-03

Answer 1

account titles debit credit calculation transaction interest receivable $660 12000*0.11*6/12 $660 interest revenue |(to record interest revenue) 38400/6 depreciation expense $6,400 accumulated depreciation $6,400 |(to record depreciation expense) 7200/6*2 deferred rent revenue $2,400 $2,400 rent revenue (to record rent revenue) 2880/24*15 prepaid insurance $1,800 $1,800 insurance expense |(to record prepaid insurance) interest expense 24000*11%*3/12 $60 interest payable $660 (to record interest expense) supplies expense $1,260 2000-740 $1,260 supplies (to record supplies expense)

adjustments to revenue interest revenue rent revenue adjustments to expenses depreciation expense -$660 -$2,400 6400 -$1,800 insurance expense interest expense 660 supplies expense 1260 $3,460 income overstated