211 points During the course of your examination of the fina

2.11 points During the course of your examination of the financial statements of Trojan Corporation for the year ended December 31, 2018, you come across several tems a. An insurance policy covering 12 months was purchased on October 1, 2018, C. There were no supplies the needing father consideration Currendy, net income is $1 rom a customer for services to be performed in 2019 The $4000 was incorectly credited to Service Revenue or s24000 The ne aount wn bepad inesurance and no adjusting entry was made for this tem in 2018 dusng erly was sheet under assets However, you discover that supplies costing $2,750 were on hand at December 31, 2018 d Troyan borrowed S0,00 torn a local bark on Seplmter 1,2018Prnegal and rterest at9% wil te on Agust 31, 2019 accrual was made tr nterest r, 2018 Required Using the information in a thwough d above, determine the proper amount of net income as of December 31, 2018 (Amounts to be deducted sheuld be indicated with minus sign) Hints RelerencesBook&Resources; Type here to search

Solution

Working notes a) prepaid expense Insurance expesne to be recognized for three months 24,000/12*3 6000 Insurance expense = $6000 b) unearned revenue of $4000 wrongly recognised as income , thus deduct it from net income c) Supplies on hand (asset) wrongly recognised as expense Thus add $2,750 to net income d) Interest expense to be recognized from september to december for 4 months (70,000*9%*4/12= 2100 hence deduct interest expense to be accrued Net income ( unadjusted) 100,000 a. Adjustment for insurance -6,000 b.Adjustment for deferred revenue -4,000 c.adjustment for supplies 2,750 d.Adjustment for interest -2,100 Net income (adjusted) 90,650