20: Quinn Spellman formed Spellman Tutoring, Inc (STI) and it has since become a popular provider of academic tutoring within the local community. You are working with the company to prepare the 20X1 financial statements and Quinn provides you with the below 12/31/20X1 account balances, all of which are normal. As indicted by the question mark, certain balances have been intentionally omitted. A/C # Account Description Balance A/C # Account Description Balance 100 Cash $? 300 Common stock $30,000 105 Accounts receivable 12,000 305 Retained earnings 20,000 110 Prepaid insurance expense 9,000 310 Dividends 20,000 115 Teaching supplies 38,000 400 Tutoring Revenue 215,000 120 Copy Machine 16,000 500 Advertising Expense 40,000 125 Accumulated depreciation 13,320 505 Depreciation expense 0 130 Land 25,000 510 Equipment Rental Expense 9,000 200 Accounts Payable- SSC 7,000 515 Insurance Expense 7,000 205 Interest Payable 0 520 Interest expense 0 210 Tutoring Advance Pay 0 525 Miscellaneous Expense ? 215 Wages Payable 0 530 Supplies Expense 0 220 Utilities Payable 0 535 Utilities expense 11,000 225 Notes payable 40,000 540 Wages expense 105,000 For purposes of this question, assume STI (Spellman Tutoring, Inc) has net income for the twelve months ended 12/31/20X1 totaling $43,000. Please consider the following 3 transactions and select the answer choice below representing the updated 12/31/20X1 net income after considering these 3 items. For purposes of this question, assume STI (Spellman Tutoring, Inc) has net income for the twelve months ended 12/31/20X1 totaling $43,000. Please consider the following 3 transactions and select the answer choice below representing the updated 12/31/20X1 net income after considering these 3 items. (i) On October 1, 20X1, STI borrowed $40,000 from the local bank. The 9-month loan charges 6% and all interest and principal on maturity on is due July 1, 20X2. (ii) (iii) During 20X1 STI prepaid insurance policies in the amount of $9,000. As of 12/31/20X1, one-third of the coverage has happened, and two-third relates to 20X2. During 20X1 STI started offering discounts to those clients that pay tutoring fees in advance. Many regular clients took advantage of this offering and during 20X1, STI collected $8,000 of advance payments from customers for future tutoring sessions. At the time of the cash collection, all $8,000 was recorded to account #400, and no additional entries were made. Quinn lets you know that as of 12/31/20X1 $5,600 of the prepaid tutoring sessions have occurred with the remainder scheduled to occur in 20X2. A. $37,000 B. $44,800 C. $45,000 D. $36,800 E. None of the answer choices provided are correct