2. The following account balances in the unadjusted trial balance at November 30, 2015 are presented below:

Unearned commissions revenue $1,875

Prepaid insurance 600

Office supplies 875

Prepaid rent 750

Salaries expense 6,240

Additional information:

1. The prepaid rent consisted of a payment for three months rent at $250 per month for November 2015, December 2015 and January 2016.
2. Office supplies on hand at December 31, 2015 amounted to $375.
3. On July 1, 2015 a one year insurance policy was purchased for $600.
4. All but $625 in the Unearned Commissions account has been earned in 2015.
5. The last three days of December 2015 salaries were earned but not paid, and have not been recorded. The total salaries for one day is $125.

Required:

1. Prepare the adjusting entries at December 31, 2015. Descriptions of the journal entry and account numbers are not required.
2. If the adjusting entries were not recorded, what affect would this have on the net income for 2015 to include the amount understated or overstated?