Problem $2-7($Algo$)$ Adjusting entries and income effects $[$LO$2-5,2-6]$

The information necessary for preparing the December $31,2024,$ year$-$end adjusting entries for Vito's Pizza Parlor appears below.

a$.$ On July $1,2024,$ purchased $$14,500$ of IBM Corporation bonds at face value. The bonds pay interest twice a year on January $1$ and

July $1.$ The annual interest rate is $12\%.$

b$.$ Vito's depreciable equipment has a cost of $$34,500,$ a five$-$year life, and no salvage value. The equipment was purchased in $2022.$

The straight$-$line depreciation method is used.

c$.$ On November $1,2024,$ the bar area was leased to Jack Donaldson for one year. Vito's received $$8,700$ representing the first six

months' rent and credited deferred rent revenue at the time cash was received.

d$.$ On April $1,2024,$ the company paid $$3,480$ for a two$-$year fire insurance policy and debited prepaid insurance at the time of the

payment.

e$.$ On October $1,2024,$ the company borrowed $$29,000$ from a local bank and signed a note. Principal and interest at $12\%$ will be paid

on September $30,2025.$

f$.$ At year$-$end, there is a $$2,250$ debit balance in the supplies $($asset$)$ account. Only $$790$ of supplies remain on hand.

Required:

Prepare the necessary adjusting journal entries on December $31,2024.$

Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. $($Ignore income tax

expense.$)$

Complete this question by entering your answers in the tabs below.

Determine the amount by which net income would be misstated if Vito's failed to record these adjusting entries. $($Ignore

income tax expense.$)$

Note: Amounts to be declucted should be indicated by a minus sign. Do not round intermediate calculations.