During the course of your examination of the financial statements of a company for the year...

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During the course of your examination of the financial statements of a company for the year ended December 31, Year 1, you discover net income in Year 1 is $42,000 but no adjusting entries have been prepared. To prepare adjusting entries, you discover the following items: a. An insurance policy covering three years was purchased on January 1, Year 1, for $7,200. The entire amount was debited to insurance expense. b. During Year 1, the company received a $900 cash advance from a customer for services to be provided in Year 2. The $900 was credited to sales revenue. c. All purchases of supplies were debited immediately to supplies expense. However, you discover that supplies costing $970 were on hand on December 31. d. The company borrowed $27,000 from a local bank on October 1, Year 1. Principal and interest at 12% will be paid on September 30, Year 2. No accrual was recorded for interest. Required: Determine the proper amount of net income for Year 1. Note: Amounts to be deducted should be indicated by a minus sign. Unadjusted net income Adjustments: a. Insurance expense overstated b. Sales revenue overstated c. Supplies expense overstated d. Interest expense understated Adjusted net income $ 42,000 EA 42,000 During the course of your examination of the financial statements of a company for the year ended December 31, Year 1, you discover net income in Year 1 is $42,000 but no adjusting entries have been prepared. To prepare adjusting entries, you discover the following items: a. An insurance policy covering three years was purchased on January 1, Year 1, for $7,200. The entire amount was debited to insurance expense. b. During Year 1, the company received a $900 cash advance from a customer for services to be provided in Year 2. The $900 was credited to sales revenue. c. All purchases of supplies were debited immediately to supplies expense. However, you discover that supplies costing $970 were on hand on December 31. d. The company borrowed $27,000 from a local bank on October 1, Year 1. Principal and interest at 12% will be paid on September 30, Year 2. No accrual was recorded for interest. Required: Determine the proper amount of net income for Year 1. Note: Amounts to be deducted should be indicated by a minus sign. Unadjusted net income Adjustments: a. Insurance expense overstated b. Sales revenue overstated c. Supplies expense overstated d. Interest expense understated Adjusted net income $ 42,000 EA 42,000

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To determine the proper amount of net income for Year 1 we need to adjust the unadjusted net income ... View the full answer