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Problem 2-7 (Algo) Adjusting entries and income effects [LO2-5, 2-6] The information necessary for preparing the December 3t, 2021 year-end acjusting entries for Vito's Pizza Parlor appears below. Vito's fescal year-end is December 31 . a. On July 1,2021, purchased $18,000 of 18M Corporation bonds ot face value. The bonds pay interest twice a year on January 1 and July 1, The annual interest rate is 11%. b. Vito's depreciable equipment has a cast of $8,400, a six-year life, and no salvage value. The equipment was purchased in 2019 The straightiline depreciation method is used. c. On November 1,2021, the bar area was leased to Jack Donaldson for one year. Vito's recelved $7,800 representing the first six months' rent and credited deferred rent revenue. d. On April 1, 2021, the company paid $1,680 for a two year fire and liability insurance poticy and debited insurance expense. e. On Octobet 1,2021, the company borrowed $14,000 from a local bank and signed a note. Principal and interest at 11% will be pald on Spptember 30,2022 t. At year-end, there is a $1,350 debit balance in the supplies (asset) account, Only $640 of supplies remain on hand. Required: 1. Prepare the necessory adjusting journol entries at December 31,2021. 2. Determine the amount by which net income would be misstoted if Vito's falled to record these adjusting entries. (lgnore income tox expense) Journal entry worksheet 456 On July 1, 2021, purchased $18,000 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 11%. Note: Enter debits before credits. income tax expense.) (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations.) Problem 2-7 (Algo) Adjusting entries and income effects [LO2-5, 2-6] The information necessary for preparing the December 3t, 2021 year-end acjusting entries for Vito's Pizza Parlor appears below. Vito's fescal year-end is December 31 . a. On July 1,2021, purchased $18,000 of 18M Corporation bonds ot face value. The bonds pay interest twice a year on January 1 and July 1, The annual interest rate is 11%. b. Vito's depreciable equipment has a cast of $8,400, a six-year life, and no salvage value. The equipment was purchased in 2019 The straightiline depreciation method is used. c. On November 1,2021, the bar area was leased to Jack Donaldson for one year. Vito's recelved $7,800 representing the first six months' rent and credited deferred rent revenue. d. On April 1, 2021, the company paid $1,680 for a two year fire and liability insurance poticy and debited insurance expense. e. On Octobet 1,2021, the company borrowed $14,000 from a local bank and signed a note. Principal and interest at 11% will be pald on Spptember 30,2022 t. At year-end, there is a $1,350 debit balance in the supplies (asset) account, Only $640 of supplies remain on hand. Required: 1. Prepare the necessory adjusting journol entries at December 31,2021. 2. Determine the amount by which net income would be misstoted if Vito's falled to record these adjusting entries. (lgnore income tox expense) Journal entry worksheet 456 On July 1, 2021, purchased $18,000 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 11%. Note: Enter debits before credits. income tax expense.) (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations.)

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