The Book Company – Adjusting entries

| June 1, 2017

5) The Book Company had the following adjustments at
December 31, the end of the accounting period:
A. The Book
Company uses straight-line depreciation for its equipment. The amount of
depreciation to be recorded for the equipment is $10,500.
B. Accrued
interest of $2,000 on a note receivable will be received in January.
C. On
November 1, The Book Company paid for five months of rent in advance and
debited Prepaid Rent. Rent is $1,000 per month.
D. On
August 1, the company collected $24,000 in advance for a consulting contract,
which is to be earned evenly over the next 12 months. The original entry
debited cash and credited unearned revenue.
E. Employees
are owed salaries for 3 days of a 5 day workweek; weekly payroll is $30,000.
F. The
unadjusted balance of the supplies account is $2,750. Based on a physical
count, the cost of supplies on hand is $1,250.
G. The
company has incurred interest expense of $850 that will be paid in January.

1. Journalize
the adjusting entries. (18 points)
2. Assuming
the adjustments were not made, calculate the net overstatement or
understatement this would have on net income. Would the company appear to be
more or less profitable if the adjustments were not made? (5 points)

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