Question

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	2,125
Accounts receivable	1,150				1,025
Prepaid insurance	1,750						800
Supplies	480						265
Equipment	8,470
Accumulated depreciation—equipment			870				340
Accounts payable			1,290
Retained earnings			10,010
Dividends	1,200
Fees earned			7,400				1,025
Rent expense	1,450
Salaries expense	2,450
Utilities expense	495
Insurance expense					800
Supplies expense					265
Depreciation expense—equipment					340
Totals	19,570		19,570		2,430		2,430

Multiple Choice

• $1,600.

• $1,940.

• $3,005.

• $4,030.

• $2,625.

Answer 1

Fees earned ($7,400+$1,025)		$   8,425
Less: Expenses
Rent expense	$   1,450
Salaries expense	$   2,450
Utilities expense	$      495
Insurance expense	$      800
Supplies expense	$      265
Depreciation expense—equipment	$      340
Total expenses		$   5,800
Net income		$   2,625

Answer is E. $2,625

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