Oral Arts Dental Laboratories is a family-owned and operated full-service dental laboratory located in Huntsville, Alabama. The information necessary for preparing the December 31, 2021 year-end adjusting entries for Oral Arts appears below. Oral Art's fiscal year-end is December 31. a. On July 1, 2021, purchased $12,500 of Microsoft Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1. The annual interest rate is 10%. b. Oral Arts' depreciable equipment has a cost of $26,000, a four-year life, and no salvage value. The equipment was purchased in 2019. The straight-line depreciation method is used. c. On November 1, 2021, a portion of the building was leased to Greg Gorton for one year. Oral Arts's received $7,500 representing the first six months' rent and credited deferred rent revenue. d. On April 1, 2021, the company paid $3,000 for a two-year fire and liability insurance policy and debited insurance expense. e. On October 1, 2021, the company borrowed $25,000 from a local bank and signed a note. Principal and interest at 10% will be paid on September 30, 2022. f. At year-end, there is a $2,050 debit balance in the supplies (asset) account. Only $750 of supplies remain on hand. Required: 1. Prepare the necessary adjusting journal entries at December 31, 2021. 2. Determine the amount by which net income would be misstated if Oral Arts failed to record these adjusting entries. (Ignore income tax expense.) View transaction list Journal entry worksheet 1 2 3 4 5 6 On July 1, 2021, purchased $12,500 of Microsoft Corporation bonds at face value. The bonds pay interest twice a year on January 1 and July 1. The annual interest rate is 10%. Note: Enter debits before credits. Transaction General Journal Debit Credit a. Journal entry worksheet 2 4 5 6 Oral Arts' depreciable equipment has a cost of $26,000, a four-year life, and no salvage value. The equipment was purchased in 2019. The straight-line depreciation method is used. Note: Enter debits before credits. Transaction b. General Journal Debit Credit 8:56 Journal entry worksheet 1 2 3 5 6 On November 1, 2021, a portion of the building was leased to Greg Gorton for one year. Oral Arts received $7,500 representing the first six months' rent and credited deferred rent revenue. Note: Enter debits before credits. Transaction C. General Journal Debit Credit Journal entry worksheet > 1 2 3 4 6 On April 1, 2021, the company paid $3,000 for a two-year fire and liability insurance policy and debited insurance expense. Note: Enter debits before credits. Transaction d. General Journal Debit Credit Journal entry worksheet 1 2 3 4 5 fm On October 1, 2021, the company borrowed $25,000 from a local bank and signed a note. Principal and interest at 10% will be paid on September 30, 2022. Note: Enter debits before credits. Transaction e. General Journal Debit Credit Journal entry worksheet 1 2 3 4 5 6 At year-end, there is a $2,050 debit balance in the supplies (asset) account. Only $750 of supplies remain on hand. Note: Enter debits before credits. Transaction f. General Journal Debit Credit Help Save & E Determine the amount by which net income would be misstated if Lina's failed to record these adjusting entries. (Ignore income tax expense.) (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations.) Income Overstated (Understated) Adjustments to revenues: Adjustments to expenses: $ 0 < Required 1 Required 2 >