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28E_1

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Horngren'S Financial And Managerial Accounting
Found in: Page 166

Short Answer

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

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

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep1: Explanation on Adjusting Entries

Adjustries entries are used to record the accrued revenues and expenses at the end of the period.

Step2: Calculation of Salaries Expense

Salaries expense is calculated as follows:

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