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Bookmarks Window Help ezto mheducation.com Question 2 (of 5) · save & Exit Submit 1.00 points Exercise 3-5 Determine the amount of net income (LO3-1) the fnancial statements of Trojan Corporation for the year ended December 31, 2018, you come across During the course of your examination of several items needing further consideration Currently, net income is $82,000 An insurance policy covering 12 months was purchased on October 1, 2018, for $13,200. The entire amount was debited to Prepaid Insurance a. and no adjusting entry was made for this item in 2018 b. During 2018, the company received a $2200 cash advance from a customer for services to be performed in 2019. The credited to Service Revenue. c. There were no supplies listed in the balance sheet under 31, 2018 d. Trojan borrowed $52,000 from a local bank on September 1, 2018. Principal and made for interest in 2018 $2,200 was incorrectly assets. However, you discover that supplies costing $1,850 were on hand at December iterest at 12% wil be paid on August 31, 2019. No accrual was Required: ion in a. through d. above, determine the proper amount of net income as of December 31, 2018. (Amounts to be deducted should be indicated with a minus sign.) Net income (unadjusted) a. Adjustment for insuranoe b. Adjustment for deferred revenue c. Adjustment for supplies d. Adjustment for interest Net income (adjusted)

Explanation / Answer

Q1 Net income(unadjusted) $82,000 a. Adjustment for insurance -3300 (13200 x 3/12) Insurance expense recognition for 3 months b. Adjustment for deferred revenue -2200 reversal of service revenue to unearned revenue c. Adjustment for supplies 1850 reversal of supplies expense d. Adjustment for interest -2080 =-52000*12%*4/12 Interest expense recognition for 4 months Net income(adjusted) $76,270 Q2 part b Ending balance of retained earning $ 22,000.00 (16000+40600-33000-1600)

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