E3-33B. (Learning Objectives 1, 3: Journalizing adjusting entries and analyzing their effects on net income; comparing accrual and cash basis) An accountant made the following adjustments at December 31, the end of the accounting period:

1 Prepaid insurance, beginning, 800. Payments for insurance during the period, 2,500. Prepaid insurance, ending, 1,400.

2 Interest revenue accrued, 1,200.

3 Unearnedservicerevenue,beginning,1,500.Unearnedservicerevenue,ending,600.

4 Depreciation, 4,700.

5 Employees salaries owed for three days of a five-day work week; weekly payroll,

24,000.

6 Income before income tax, 21,000. Income tax rate is 25%.

Requirements

1 Journalize the adjusting entries.

2 Suppose the adjustments were not made. Compute the overall overstatement or understate-

ment of net income as a result of the omission of these adjustments.