Question

NEED HELP

[The following information applies to the questions displayed below.) Val's Hair Emporum operates a hair salon. Its unadjusted trial balance as of December 31, 2018, follows, along with Information about selected accounts. Credit Account Names Cash Supplies Prepaid Rent Debit $ 2,800 3,300 3,60 Accounts Payable $1,000 Further Information As reported on December 31 bank statement. Based on count, only $800 of supplies still exist. This amount was paid November 1 for rent through the end of January, This represents the total amount of bills received for supplies and utilities through December 15. Val estimates that the company has received $350 of utility services through December 31 for which it has not yet been billed. Stylists have not yet been paid $1ee for their work on December 31. The company has paid last year's income taxes but not this year's taxes. This amount was contributed for common stock in prior years. This is the balance reported at the end of last year. Customers pay cash when they receive services. Salaries and Wages Payable Income Tax Payable 1.ee 700 59,500 28,100 Common Stock Retained Earnings Service Revenue Salaries and wages Expense Utilities Expense Rent Expense Supplies Expense Income Tax Expense Totals 11.200 10,000 This is the cost of stylist wages through December 30. This is the cost of utilities through December 15. This year's rent was $1,000 per month This is the cost of supplies used through November 30. The company has an average tax rate of 30% $62,200 $62,200 4.6. Prepare the adjusted net income that the company should report for the year ended December 31, 2018 4.b. By what dollar amount did the adjustments in requirement (3) cause net income to increase or decrease?

Answer 1

1. Income Statement -

VAL'S HAIR EMPORIUM Income Statement For the Year Ended December 31, 2018 Revenue: Service Revenue $ 59,500 Total Revenue $ 59,500 Expenses: Salaries and Wages Expense $ 28,200 Rent Expense $ 12,000 Utilities Expense $ 11,550 Supplies Expense $ 6,300 Income Tax Expense $ 435 Total Expenses $ 58,485 Net Income $ 1,015

2. Net Income decreased by $3,465.

VAL'S HAIR EMPORIUM Expenses For the Year Ended December 31, 2018 Expenses: Salaries and Wages Expense $ 100 Rent Expense $ 2,000 Utilities Expense $ 350 Supplies Expense $ 2,500 Income Tax Expense $ (1,485) Total Expenses $ 3,465

Total additional Expense incurred $4,950 but due to expense increase net income will go down and hence income tax will be reduced.

Hence Income tax Expense will be lower and expense reduced from $4,950 to $3,465.

Net Income decreased by $3,465