E3-20A. (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:

a. Prepaid insurance, beginning, $600. Payments for insurance during the period, $1,800.

Prepaid insurance, ending, $1,000.

b. Interest revenue accrued, $1,500.

c. Unearned service revenue, beginning, $1,200. Unearned service revenue, ending, $800.

d. Depreciation, $4,400.

e. Employees’ salaries owed for three days of a five-day work week; weekly payroll, $20,000.

f. Income before income tax, $24,000. Income tax rate is 25%.
Requirements 1. Journalize the adjusting entries.
2. Suppose the adjustments were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments.