Question

Aeroplane Insurance Agency prepares mon income statement for the month of June onthly financial statements. Presented below is an the month of June that is correct based on the information considered. AEROPLANE INSURANCE AGENCY Income Statement For the Month Ended June 30 Revenues 800 Sales revenue $35,000 Expenses Salaries and wages expense...... $6,000 Rent expense 4,200 Depreciation expense...... 2,800 Advertising expense.. Total expenses... 13.800 Net income ........... $21,200 Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information: 1. A utility bill for $2,500 was received on the last day of the month for electric and gas service for the month of June. 2. A company insurance salesman sold a life insurance policy to a client for a premium of $25,000. The agency billed the client for the policy and is entitled to a commission of 20%. 3. Supplies on hand at the beginning of the month were $3,000. The agency purchased additional supplies during the month for $4,000 in cash and $2,200 of supplies were on hand at June 30. 4. The agency purchased a new car at the beginning of the month for $22,000 cash. The car will depreciate $5,400 per year. 5. Salaries owed to employees at the end of the month total 56,100. The salaries will be paid on July 5. Instructions 1. Prepare Adjusting Entries 2. Based on the adjusting entries, prepare a corrected income statement NANO

Answer 1

1) Journalize adjusting Entries: Transaction General Journal a. Utilities expense Utilities payable (To adjust Utilities expense) Debit $2.500 Credit $2,500 b. $5,000 Account receivable Commission revenue ($25.000 * 20%) (To adjust Sales revenue) $5,000 C. $4.800 Supplies Expense ($3,000+ $4,000 - $2,200) Supplies (To adjust supplies expense) $4.800 d $450 Depreciation Expense ($5,400/12) Accumulated Depreciation $450 e. $6.100 Salaries and wages payable (To adjust salaries expense) 2) $40.000 Aeroplane Insurance Agency Income Statement For the Month Ended June 30 Revenues Sales revenue ($35,000 + $5,000) Expenses: Salaries and Wages expense ($6.000 + $6.100) Rent expense Depreciation expense ($2.800 +S450) Advertising expense Supplies expense Utilities expense Total expenses Net Income $12.100 $4,200 $3,250 $800 $4.800 $2.500 $27.650 $12,350