A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period? Unadjusted
Trial Balance
Adjustments
Debit
Credit
Debit
Credit
Cash
1,975
Accounts Receivable
1,000
875
Prepaid insurance
1,600
650
Supplies
330
115
Equipment
8,320
Accumulated depreciation-equipment
720
190
Accounts payable
1,140
Common stock
9,110
Dividends
1,050
Fees earned
7,250
875
Rent expense
1,300
Salaries expense
2,300
Utilities expense
345
Insurance expense
650
Supplies expense
115
Depreciation expense-equipment
190
Total
18,220
18,220
1,830
1,830
A)$3,305.
B)$4,180.
C)$2,350.
D)$2,540.
E)$3,225.

Question

Quizplus · Accepted Answer

Net income is calculated as total revenues minus total expenses. Fees earned (revenue) is $7,250. Total expenses are rent expense ($1,300) + salaries expense ($2,300) + utilities expense ($345) + insurance expense ($650) + supplies expense ($115) + depreciation expense ($190) = $4,900. Net income = $7,250 - $4,900 = $2,350. However, the adjustment for fees earned ($875) should be added to the revenue, making it $8,125. Thus, net income = $8,125 - $4,900 = $3,225.

A Company's December 31 Work Sheet for the Current Period