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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


Accounts and Explanation




Depreciation Expense—Equipment


Accumulated Depreciation—Equipment


To record depreciation on equipment


Insurance Expense


Prepaid Rent


To record insurance expense


Interest Expense


Interest Payable


To record accrued salaries expense


Salaries Expense


Salaries Payable


To record accrued salaries expense


Unearned Revenue


Service Revenue


To record service revenue earned


Supplies Expense


Office Supplies


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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