The intormation necessary for preparing the December 31,2021 yeat end adjusting entre- for tonic Solon and Spa appears belome. Tonic's fiscal year end is December 31 a. On July 1, 2021, Tonic purchased $18,000 of Microsoft Corporation bonds at face value. The bonds pay unterest twice a year on January 1 and July 1 . The annual interest rate is 11% b. Tonic's depreciable equipment has a cost of $8,400, a six-year life, and no salvage value. The equipment was purchased ini 2019 The straight-line depreciation method is used c. On November 1, 2021, the spa area was leased to Tracy Mueller for one year. Tonic received $7,800 representing the first tix months' rent and credited deferred rent revenue. d. On April 1, 2021, the company paid $1,680 for a two-year fire and liability insurance policy and debited insurance expense e On October 1, 2021, the compary borrowed $14,000 from a local bank and signed a note. Principal ard interest at 11\% with be paid on September 30,2022 f. At year-end, there is a $1,350 debit balance in the supplies (asset) account. Only $640 supplies remain on hand Required: 1. Prepare the necessary adjusting joumal entries at December 31,2021. 2. Determine the amount by which net income would be misstated if Tonic falled to record these adjusting entries. (ignore income lax expense.) Journal entry worksheet 2 On July 1, 2021, Tonic purchased $18,000 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 11%. Note: Enter debits before credits. Tonic's depreciable equipment has a cost of $8,400, a six-year life, and no salvage value. The equipment was purchased in 2019 . The straight-line depreciation method is used. Note: Enter debits before credits. On November 1, 2021, the spa area was leased to Tracy Mueller for one year. Tonic received $7,800 representing the first six months' rent and credited deferred rent revenue. Note: Enter debits before credits. On April 1, 2021, the company paid $1,680 for a two-year fire and liability insurance policy and debited insurance expense. Note: Enter debits before credits. On October 1, 2021, the company borrowed $14,000 from a local bank and signed a note. Principal and interest at 11% will be paid on September 30 , 2022. Note: Enter debits before credits. At year-end, there is a $1,350 debit balance in the supplies (asset) account. Only $640 of supplies remain on hand. Note: Enter debits before credits. Determine the amount by which net income would be misstated if Tonic falled to record these adjusiting entries. (Ignore Income tax expense.) (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculationss)
