## Answers

**Solution 1:**

Journal Entry - Vito's Pizza Parlor | ||||

Event | Date | Particulars | Debit | Credit |

1 | 31-Dec-18 | Interest receivables Dr | $630.00 | |

To Interest revenue ($10,500*12%*6/12) | $630.00 | |||

(To record interest revenue on bond) | ||||

2 | 31-Dec-18 | Depreciation expense Dr | $6,100.00 | |

To Accumulated depreciation - Equipment ($36,600/6) | $6,100.00 | |||

(To record depreciation on equipment) | ||||

3 | 31-Dec-18 | Deferred rent revenue Dr | $2,100.00 | |

To Rent revenue ($6,300/6*2) | $2,100.00 | |||

(To record adjusting entry of rent revenue) | ||||

4 | 31-Dec-18 | Prepaid insurance Dr | $1,575.00 | |

To Insurance expense ($2,520/24*15) | $1,575.00 | |||

(To record adjusting entry of insurance) | ||||

5 | 31-Dec-18 | Interest expense Dr | $630.00 | |

To Interest payable ($21,000*12%*3/12) | $630.00 | |||

(To record interest expense) | ||||

6 | 31-Dec-18 | Supplies Expense Dr | $1,140.00 | |

To Supplies ($1,850 - $710) | $1,140.00 | |||

(To record supplies expense) |

**Solution 2:**

Impact of adjusting entries on net income = $630 - $6,100 + $2,100 + $1,575 - $630 - $1,140 = -$3,565

Therefore net income is overstated by $3,565 if Vito's failed to record these adjusting entries.

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