The adjusting entries for the following adjustments were omitted at year-end: a. Prepaid rent expired, $3,000. b.
Question:
a. Prepaid rent expired, $3,000.
b. Depreciation, $1,300.
c. Employee salaries owed for Monday through Wednesday of a five-day work-week, $4,000.
d. Supplies used during the year, $800.
e. Unearned service revenue now earned, $4,200.
Requirement
Compute the amount that net income for the year is overstated or understated by for each omitted entry. Use the following format to help analyze thetransactions.
Transcribed Image Text:
Transaction Sample a., b., etc Overstated/Understated Amount Overstated $5,000
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Unearned revenue is money received by an individual or company for a service or product that has yet to be provided or delivered. It can be thought of as a \"prepayment\" for goods or services that a person or company is expected to supply to the purchaser at a later date. As a result of this prepayment, the seller has a liability equal to the revenue earned until the good or service is delivered. This liability is noted under current liabilities, as it is expected to be settled within a year.
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