Question
During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2016, you discover the following:
During the course of your examination of the financial statements of the Hales Corporation for the year ended December 31, 2016, you discover the following:
a. | An insurance policy covering three years was purchased on January 1, 2016, for $3,600. The entire amount was debited to insurance expense and no adjusting entry was recorded for this item. |
b. | During 2016, the company received a $625 cash advance from a customer for merchandise to be manufactured and shipped in 2017. The $625 was credited to sales revenue. No entry was recorded for the cost of merchandise. |
c. | There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing $575 were on hand at December 31. |
d. | Hales borrowed $15,000 from a local bank on October 1, 2016. Principal and interest at 12% will be paid on September 30, 2017. No accrual was recorded for interest. |
e. | Net income reported in the 2016 income statement is $31,000 before reflecting any of the above items. |
Required: |
Determine the proper amount of net income for 2016. (Amounts to be deducted should be indicated by a minus sign.)
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