Question

a. An insurance policy covering three years was purchased on January 1, 2021, for $3,600. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item. b. During 2021, the company received a $625 cash advance from a customer for merchandise to be manufactured and shipped in 2022. The $625 was credited to sales revenue. No entry was recorded for the cost of merchandise. c. There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing $575 were on hand at December 31 d. Hales borrowed $15,000 from a local bank on October 1, 2021. Principal and interest at 12% will be paid on September 30, 2022. No accrual was recorded for interest. e. Net income reported in the 2021 income statement is $31,000 before reflecting any of the above items Required: Determine the proper amount of net income for 2021. (Amounts to be deducted should be indicated by a minus sign.) Unadjusted net income Adjustments b d Adjusted net income

Answer 1

calculate following

Unadjusted net income	31000
Adjustments
a) Prepaid insurance (3600/3*2)	2400
b) Deferred revenue	-625
c) Supplies	575
d) Interest expense (15000*12%*3/12)	-450
Adjusted net income	32900