Question

Karla Tanner opened a web consulting business called Linkworks and recorded the following transactions in its first month of operations.

Apr.		1		Tanner invests $80,000 cash along with office equipment valued at $26,000 in the company in exchange for common stock.
Apr.		2		The company prepaid $9,000 cash for twelve months’ rent for office space. The company's policy is record prepaid expenses in balance sheet accounts.
Apr.		3		The company made credit purchases for $8,000 in office equipment and $3,600 in office supplies. Payment is due within 10 days.
Apr.		6		The company completed services for a client and immediately received $4,000 cash.
Apr.		9		The company completed a $6,000 project for a client, who must pay within 30 days.
Apr.		13		The company paid $11,600 cash to settle the account payable created on April 3.
Apr.		19		The company paid $2,400 cash for the premium on a 12-month insurance policy. The company's policy is record prepaid expenses in balance sheet accounts.
Apr.		22		The company received $4,400 cash as partial payment for the work completed on April 9.
Apr.		25		The company completed work for another client for $2,890 on credit.
Apr.		28		The company paid $5,500 cash in dividends.
Apr.		29		The company purchased $600 of additional office supplies on credit.
Apr.		30		The company paid $435 cash for this month’s utility bill.

Descriptions of items that require adjusting entries on April 30, follow.

• a) On April 2, the company prepaid $9,000 cash for twelve months' rent for office space.

• b) The balance in Prepaid insurance represents the premium paid for a 12-month insurance policy the policy's coverage began on April 1.

• c) Office supplies on hand as of April 30 total $1,200.

• d) Straight-line depreciation of office equipment, based on a 5-year life and a $4,000 salvage value, is $500 per month.

• e) The company has completed work for a client, but has not yet billed the $1,800 fee.

• f) Wages due to employees, but not yet paid, as of April 30 total $2,600.

Adjusted

Account affecting the: Impact on net income Adjusting entry related to: Income Statement Balance Sheet a) Rent Rent expense Prepaid rent $(750) b) Insurance Insurance expense Prepaid insurance (200) c) Office supplies Office supplies expense Office supplies (3,000) d) Depreciation Depreciation expense - Office equipment Accumulated depreciation - Office equipment (500) e) Unbilled fees Services revenue Accounts receivable 1,800 f) Unpaid wages Wages expense Wages payable (2,600) Total impact on income due to adjustments $(5,250) Net income before adjustments 0

Hi, i am not sure what the net income is!

Answer 1

INCOME STATEMENT
Revenues
Service Revenue		$       14,690
Expenses
Office Supplies expense	$         3,000
Wages expense	$         2,600
Rent Expense	$            750
Depreciation expense	$            500
Utilities Expense	$            435
Insurance expense	$            200
		$         7,485
Net Income		$         7,205

Adjusting Entry related to:	Account Affecting the		Impact on Net Income
	Income Statement	Balance Sheet
a) Rent	Rent Expense	Prepaid Rent	$ -750
b) Insurance	Insurance expense	Prepaid Insurance	$ -200
c) Office supplies	Office supplies expense	office supplies	$ -3,000
d) Depreciation	depreciation expense	accumulated depreciation	$ -500
e) Unbilled Fees	Service Revenue	Accounts Receivable	$ 1,800
f) Unpaid Wages	Wages expense	wages payable	$ -2,600
Total impact on income due to adjustments			$ -5,250
Net impact of adjusting entry (7205+5250)			$ 12,455
			$ 7,205