FINANCIAL ACCOUNTING - Eighth Edition E3-22A (15-20 min.

Solutions Manual

Learning Objectives 1, 3: Journalizing adjusting entries and analyzing their effects on net income; comparing accrual and cash basis An accountant made the following adjustments at December 31, the end of the accounting period: a. Prepaid insurance, beginning, $500. Payments for insurance during the period, $1,500. Prepaid insurance, ending, $1,000. Interest revenue accrued, $1,100. Unearned service revenue, beginning, $1,200. Unearned service revenue, ending, $400. Depreciation, $4,900. Employees salaries owed for three days of a five-day work week; weekly payroll, $14,000. Income before income tax, $22,000. Income tax rate is 25%.

b. c.

d. e.

f.

Requirements 1. 2. Journalize the adjusting entries. Suppose the adjustments were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments.

Chapter 3: Accrual Accounting and Income

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FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

Solution: Req. 1 Adjusting Entries ACCOUNT TITLES

DATE a.

DEBIT

CREDIT

b.

c.

d.

e.

f.

Req. 2

Chapter 3: Accrual Accounting and Income

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