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Compute the overall understatement of net income

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Reference no: EM132531370

Accounting period:

a) Prepaid insurance, beginning, $700. Payments for insurance during the period, $2,100. Prepaid insurance, ending, $800.

b) Interest revenue accrued, $900.

c) Unearned service revenue, beginning, $800. Unearned service revenue, ending, $300.

d) Depreciation, $6,200.

e) Employees' salaries owed for three days of a five-day work week; weekly payroll, $9,000.

f) Income before income tax expense, $20,000. Income tax rate is 25%.

Requirements

Question 1. Journalize the adjusting entries.

Question 2. Suppose the adjustments were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments.

Reference no: EM132531370

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