The following account balances were taken from ABC Company’s unadjusted trial ba
ID: 2333260 • Letter: T
Question
The following account balances were taken from ABC Company’s unadjusted trial balance at December 31, 2020: Accounts Payable ............ $56,000 Accounts Receivable ......... $42,000 Cash ........................ $11,000 Common Stock ................ $63,000 Cost of Goods Sold .......... $52,000 Income Tax Expense .......... $12,000 Insurance Expense ........... $21,000 Inventory ................... $70,000 Land ........................ $68,000 Mortgage Payable ............ $49,000 Patent ...................... $31,000 Prepaid Insurance ........... $17,000 Rental Revenue .............. $46,000 Retained Earnings ........... $72,000 (at January 1, 2020) Sales Revenue ............... $95,000 Supplies .................... $19,000 Wage Expense ................ $38,000 ABC Company has not yet recorded adjusting entries related to the following two items: (1) $11,000 of supplies were used up during 2020. (2) ABC Company has provided services to a customer totaling $14,000 as of December 31, 2020. However, the customer has not yet paid ABC Company. Calculate the net income reported by ABC Company for 2020 after the appropriate adjusting entries have been recorded and posted.
Explanation / Answer
Adjusting Entries
Date
General Journal
Debit
Credit
31-Dec
Supplies Expense
$ 11,000.00
Supplies
$ 11,000.00
(Supplies Consumed)
31-Dec
Accounts Receivable
$ 14,000.00
Service Revenue
$ 14,000.00
(Service revenue Recorded)
ABC Company
Income Statement
For the Year ended Dec 31 2020
Revenues
Sales revenue
$ 95,000.00
Cost of Goods Sold
$ 52,000.00
Gross Profit
$ 43,000.00
Other Revenues
Service Revenue
$ 14,000.00
Rental Revenue
$ 46,000.00
Total Revenue
$ 103,000.00
Operating Expenses
Insurance Expense
$ 21,000.00
Supplies Expense
$ 11,000.00
Wage Expense
$ 38,000.00
Total Operating Expenses
$ 70,000.00
Income Before Taxes
$ 33,000.00
Income tax Expense
$ 12,000.00
Net Income
$ 21,000.00
Answer – Net income after adjustments is $ 21,000.
Adjusting Entries
Date
General Journal
Debit
Credit
31-Dec
Supplies Expense
$ 11,000.00
Supplies
$ 11,000.00
(Supplies Consumed)
31-Dec
Accounts Receivable
$ 14,000.00
Service Revenue
$ 14,000.00
(Service revenue Recorded)