During the course of your examination of the financial statements of the Hales Corporation for the year

Question:

During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2013, you discover the following:

a. An insurance policy covering three years was purchased on January 1, 2013, for $6,000. The entire amount was debited to insurance expense and no adjusting entry was made for this item.

b. During 2013, the company received a $1,000 cash advance from a customer for merchandise to be manufactured and shipped in 2014. The $1,000 was credited to sales revenue. No entry was made for the cost of merchandise.

c. There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing $750 were on hand at December 31.

d. Hales borrowed $20,000 from a local bank on October 1, 2013. Principal and interest at 12% will be paid on September 30, 2014. No accrual was made for interest.

e. Net income reported in the 2013 income statement is $30,000 before reflecting any of the above items.

Required:

Determine the proper amount of net income for 2013.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate accounting

ISBN: 978-0077647094

7th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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