The information necessary for preparing the December 31, 2024, year-end adjusting entries for Vito's Pizza Parlor appears below. a On July 1, 2024, purchased $14,500 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1 The annual interest rate is 12%. b. Vito's depreciable equipment has a cost of $34,500, a five-year life, and no salvage value. The equipment was purchased in 2022 The straight-line depreciation method is used. c. On November 1, 2024, the bar area was leased to Jack Donaldson for one year. Vito's received $8,700 representing the first six months rent and credited deferred rent revenue at the time cash was received. d. On April 1, 2024, the company paid $3,480 for a two-year fire insurance policy and debited prepaid insurance at the time of the payment e On October 1, 2024, the company borrowed $29,000 from a local bank and signed a note. Principal and interest at 12% will be paid on September 30, 2025. 1. At year-end, there is a $2,250 debit balance in the supplies (asset) account. Only $790 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries on December 31, 2024. 2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax expense.)
The information necessary for preparing the December 31, 2024, year-end adjusting entries for Vito's Pizza Parlor appears below. a On July 1, 2024, purchased $14,500 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1 The annual interest rate is 12%. b. Vito's depreciable equipment has a cost of $34,500, a five-year life, and no salvage value. The equipment was purchased in 2022 The straight-line depreciation method is used. c. On November 1, 2024, the bar area was leased to Jack Donaldson for one year. Vito's received $8,700 representing the first six months rent and credited deferred rent revenue at the time cash was received. d. On April 1, 2024, the company paid $3,480 for a two-year fire insurance policy and debited prepaid insurance at the time of the payment e On October 1, 2024, the company borrowed $29,000 from a local bank and signed a note. Principal and interest at 12% will be paid on September 30, 2025. 1. At year-end, there is a $2,250 debit balance in the supplies (asset) account. Only $790 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries on December 31, 2024. 2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax expense.)
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter4: Income Measurement And Accrual Accounting
Section: Chapter Questions
Problem 4.1P: Adjusting Entries Kretz Corporation prepares monthly financial statements and therefore adjusts its...
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The information necessary for preparing the December 31, 2024, year-end adjusting entries for Vito's Pizza Parlor appears below.
a. On July 1, 2024, purchased $14,500 of IBM Corporation bonds at face value. The bonds pay interest twice a year on January 1 and
July 1. The annual interest rate is 12%.
b. Vito's depreciable equipment has a cost of $34,500, a five-year life, and no salvage value. The equipment was purchased in 2022.
The straight-line depreciation method is used.
c On November 1, 2024, the bar area was leased to Jack Donaldson for one year. Vito's received $8,700 representing the first six
months' rent and credited deferred rent revenue at the time cash was received.
d. On April 1, 2024, the company paid $3,480 for a two-year fire insurance policy and debited prepaid insurance at the time of the
payment
e On October 1, 2024, the company borrowed $29,000 from a local bank and signed a note. Principal and interest at 12% will be paid
on September 30, 2025.
f. At year-end, there is a $2,250 debit balance in the supplies (asset) account. Only $790 of supplies remain on hand.
Required:
1. Prepare the necessary adjusting journal entries on December 31, 2024.
2. Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. (Ignore income tax
expense.)
Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Adjustments to revenues:
Adjustments to expenses:
siguta
Income
Overstated
(Understated)
< Required 1
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