Best Company had the following items that require adjustment at year-end.
a. Cash for equipment rental in the amount of $3,800 was paid in advance. The $3,800 was debited to prepaid rent when paid. At year-end, $2,950 of the prepaid rent had been used.
b. Cash for insurance in the amount of $8,200 was paid in advance. The $8,200 was debited to prepaid insurance when paid. At year-end, $1,850 of the prepaid insurance was still unused.
Required:
1. Prepare the adjusting journal entries needed at December 31.
2. What is the effect on the financial statements if these adjusting entries are not made?
3. What is the balance in prepaid equipment rent and insurance expense at December 31?