Question

There were no supplies list in the balance sheet under assets. however you discover that supplies costing $750 were on hand at December 31？

E 2-16 External transactions and adjusting entries • LO2-3, LO2-6 In ad Res Dete The is the E2-20 Worksheet • Appendix 2A red rent revenue? The following transactions occurred during 2021 for the Beehive Honey Corporation: Feb. 1 Borrowed $12,000 from a bank and signed a note. Principal and interest at 10% will be paid on January 31, 2022 Apr. 1 Pald $3,600 to an insurance company for a two-year fire insurance policy. July 17 Purchased supplies costing $2,800 on account. The company records supplies purchased in an asset account. At the year-end on December 31, 2021, supplies costing $1,250 remained on hand. Nov. 1 A customer borrowed $6,000 and signed a note requiring the customer to pay principal and 8% Interest on April 30, 2022 Required: 1. Record each transaction in general journal form. Omit explanations. 2. Prepare any necessary adjusting entries at the year-end on December 31, 2021. No adjusting entries were recorded during the year for any item. During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2021. you discover the following: a. An insurance policy covering three years was purchased on January 1, 2021, for $6,000. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item b. During 2021, the company received a $1,000 cash advance from a customer for merchandise to be manufactured and shipped in 2022. The $1.000 was credited to sales revenue. No entry was recorded for the cost of merchandise e. There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing E 2-17 Accrual accounting income determination LO2-5, LO2-9 $750 were on hand at December 31. d. Hales borrowed $20.000 from a local bank on October 1, 2021. Principal and interest at 12 will be paid on September 30, 2022. No accrual was recorded for interest, e. Net income reported in the 2021 income statement is $30,000 before reflecting any of the above teme Required: Determine the proper amount of net income for 2021.

Answer 1

Please refer below workings

Credit(a) Journal Entri PATE DO Particulars Debit (3) Feb. 1/2021 Cash/ Bane Ale 12.000 To Notes payable 04 19.000 April 112023 Insurance Srpene [3600 ron) 1,300 Prepaid insurance to cash Bank 3600 July 17/2021 Supplies -Asa ALL 2.800 To accounts payable à,800 ALOU 1|2021 DY 6,000 Notes Receivable All To cash/Bank 6,000 Adjusting entries on Dec. 31-2021 1) Booking of inte accrued interest for notes payable 1106 Interest Expense Al 1100 TO Accred interest 1.000X210) - (current liability Protit & LOSS ALL ALL 155o. To supplies -asse A (2800-123) - (charging supplies used to protit & loss o DV Interest Receivable a DY 80 (Asset) To Interest Income (6000 X87.xx2) 80 Being interes relivable on notu receivable boored] 2020-9-15 08:29

DATE ot net income for 2021 Am ($) 30,000 Determination of proper amount Particulars Unadjusted net income Adjustments a) Insurance expenses over stated 7 4000 (6000x² - 1000 b) sales revenue overstated (Advance from customer is liability, untill actual sale is made ] 750 supplies unaccounted (As supplies not accounted income was overflated, hence reducing that amount] d) Interest Expense understated - 600 (20,000xlay3] Adjusted income. 31,650 2020-9-15 08:37