On December 31 of the current year, Rulem Company provides you with the following information:

(a) Accrued interest on a note payable amounts to $850 at year-end.

(b) Prepaid insurance that expired during the year totals $2,500 at year-end.

(c) Unearned rent revenue that was earned during the year totals $3,600 at year-end.

Required: (1) Using T-accounts, record the end-of-period adjustment of Rulem for each of the preceding items.

(2) Explain the effect on Rulem’s current financial statements if each of the end-of-period adjustments had not been made. Ignore income taxes.

 TYK-1