28E_1

Question

Question :The following data at July 31, 2018, are given for RCO: a. Depreciation, $600. b. Prepaid rent expires, $200. c. Interest expense accrued, $700. d. Employee salaries owed for Monday through Thursday of a five-day workweek; weekly payroll, $8,000. Unearned revenue earned, $1,000. f. Office supplies used, $150. Requirements 1. Journalize the adjusting entries needed on July 31, 2018. 2. Suppose the adjustments made in Requirement 1 were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments

Step-by-Step Solution

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Answer

Adjusting entries are as follows:

	Journal entry
Transactions	Accounts and Explanation	Debit	Credit
(a)	Depreciation Expense—Equipment	$600
	Accumulated Depreciation—Equipment		$600
	To record depreciation on equipment

(b)	Insurance Expense	$200
	Prepaid Rent		$200
	To record insurance expense

(c)	Interest Expense	$700
	Interest Payable		$700
	To record accrued salaries expense

(d)	Salaries Expense	$6,400
	Salaries Payable		$6,400
	To record accrued salaries expense

(e)	Unearned Revenue	$1,000
	Service Revenue		$1,000
	To record service revenue earned

(f)	Supplies Expense	$150
	Office Supplies		$150
	To record office supplies used