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E3-33B. (Learning Objectives 1, 3: Journalizing adjusting entries and analyzing their
effects on net income; comparing accrual and cash basis) An accountant made the following
adjustments at December 31, the end of the accounting period:
a. Prepaid insurance, beginning, €800. Payments for insurance during the period, €2,500.
Prepaid insurance, ending, €1,400.
b. Interest revenue accrued, €1,200.
c. Unearned service revenue, beginning, €1,500. Unearned service revenue, ending, €600.
d. Depreciation, €4,700.
e. Employees' salaries owed for three days of a five-day work week; weekly payroll,
€24,000.
f. Income before income tax, €21,000. Income tax rate is 25%.
Requirements
1. Journalize the adjusting entries.
2. Suppose the adjustments were not made. Compute the overall overstatement or understate-
ment of net income as a result of the omission of these adjustments.

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