Prior to making any adjusting entries, Terra Corporation had net income of $155,100. The following adjusting entries were made: salaries payable, $1,574; interest earned on short-term investments but not yet recorded or collected, $7,268; adjustment to prepaid insurance for $5,538 for an insurance policy that expired during the period; and fees of $586 collected in advance that have now been earned. After recording these adjustments, net income would be

Question

Quizplus · Accepted Answer

The net income is adjusted by adding the interest earned ($7,268) and the fees earned ($586), and subtracting the salaries payable ($1,574) and the expired insurance ($5,538). This results in a new net income of $155,842.

Prior to Making Any Adjusting Entries, Terra Corporation Had Net