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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:
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:
- An insurance policy covering three years was purchased on January 1, 2021, for $3,300. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item.
- During 2021, the company received a $600 cash advance from a customer for merchandise to be manufactured and shipped in 2022. The $600 was credited to sales revenue. No entry was recorded for the cost of merchandise.
- There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing $540 were on hand at December 31.
- Hales borrowed $14,000 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.
- Net income reported in the 2021 income statement is $29,000 before reflecting any of the above items.
Required:
Determine the proper amount of net income for 2021. (Amounts to be deducted should be indicated by a minus sign.)
unadjusted net income$_______
adjustments:
a.insurance expense overstated$ ________
b. sales revenue overstated $ ________
c.supplies expense overstated$ ________
d.interest expense understated $________
adjusted net income $________
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