The Book Company Had the Following Adjustments at December 31

question 4

Essay

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.
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?

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Definitions:

Foreign Assets

Financial assets held in a country by individuals or institutions from another country, including securities, properties, and bank accounts.

U.S. Interest Rate

The rate at which the Federal Reserve lends to banks, influencing borrowing costs and economic activity in the United States.

U.S. Assets

Assets located within the United States that might include properties, stocks, bonds, and other financial instruments.

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies, determining exchange rates for every currency.