For its revenue transactions, the academy maintains these accounts: Cash, Accounts Receivable, Unearned Service Revenue, and Service Revenue. The academy owns 10 horses, a stable, a riding corral, riding equipment, and office equipment. These assets are accounted for in the following accounts: Horses, Buildings, and Equipment. The academy employs stable helpers and an office employee, who receive weekly salaries. At the end of each month, the mail usually brings bills for advertising, utilities, and veterinary service. Other expenses include feed for the horses and insurance. For its expenses, the academy maintains the following accounts: Supplies, Prepaid Insurance, Accounts Payable, Salaries and Wages Expense, Advertising Expense, Utilities Expense, Maintenance and Repairs Expense, Supplies Expense, and Insurance Expense. Sairas sole source of personal income is dividends from the academy. Thus, the corporation declares and pays periodic dividends. To account for stockholders equity in the business and dividends, two accounts are maintained: Common Stock and Dividends. During the first month of operations, an inexperienced bookkeeper was employed. Saira asks you to review the following eight entries of the 50 entries made during the month. In each case, the explanation for the entry is correct.

Question 1) What was the correct net income for May, assuming the bookkeeper originally reported net income of $5,400 after posting all 50 entries?

The answer is not 5280.

Net Income reported before	5,400
Less: Service Revenue wrongly reported	-600
Add: Wrongly reported as Salaries and Wages Expense	480
Correct Net Income	5,280

Original Journal Entry Correct Journal Entry Debit Credit Debit Credit 1-May Cash $ 18,000 1-May Cash $ 18,000 Unearned Service $ 18,000 Stock $18,000 Revenue lssued common stock in exchange for $18,000 (lssued common stock in exchange for $18,000 5-MayCash $300 5-May Cash $300 Service Revenue 300 Service Revenue $ 300 Received $300 cash for lesson fees) Received $300 cash for lesson fees) May-07 Cash May-07 Cash $ 600 $ 600 Service Revenue $ 600 $ 600 arned services Received $600 for boarding of horses beginning June 1) Received $600 for boarding of horses beginning June 1) 9-My Supplies $ 1800 9-May Supplies $1800 Cash $1800 $1800 ts payable Purchased estimated 5 months' supply ot teed Purchased estimated 5 months' supply o eed and hay for $1,800 on account] and hay for $1,800 on account) May-14 Equipment $ 100 May-14 Equipment $ 1000 Cash $1000 Cash $1000 Purchased desk and other office equipment for $1,000 cash) Purchased desk and other office equipment for $1,000 cash) May-15Salaries $480 May-15 Dividends $480 Cash $ 480 Cash $ 480 (lssued check to Saira for personal use) (lssued check to Saira for personal use) May-20 Cash May-20 Cash $176 185 $185 185 Dervice revenue Dervice revenue Receed $ ! cash or riding ees) lHeceivedo cash for riding fees $90 31-May Maintenance and Reps30 -May Maintenance and Repairs Expense Expense $90 $90 Accounts Receivable Accounts Payable Received bill of $90 from carpenter for repair services performed) Received bill of $30 from carpenter for repair services performed] Original Journal Entry Correct Journal Entry Debit Credit Debit Credit 1-May Cash $ 18,000 1-May Cash $ 18,000 Unearned Service $ 18,000 Stock $18,000 Revenue lssued common stock in exchange for $18,000 (lssued common stock in exchange for $18,000 5-MayCash $300 5-May Cash $300 Service Revenue 300 Service Revenue $ 300 Received $300 cash for lesson fees) Received $300 cash for lesson fees) May-07 Cash May-07 Cash $ 600 $ 600 Service Revenue $ 600 $ 600 arned services Received $600 for boarding of horses beginning June 1) Received $600 for boarding of horses beginning June 1) 9-My Supplies $ 1800 9-May Supplies $1800 Cash $1800 $1800 ts payable Purchased estimated 5 months' supply ot teed Purchased estimated 5 months' supply o eed and hay for $1,800 on account] and hay for $1,800 on account) May-14 Equipment $ 100 May-14 Equipment $ 1000 Cash $1000 Cash $1000 Purchased desk and other office equipment for $1,000 cash) Purchased desk and other office equipment for $1,000 cash) May-15Salaries $480 May-15 Dividends $480 Cash $ 480 Cash $ 480 (lssued check to Saira for personal use) (lssued check to Saira for personal use) May-20 Cash May-20 Cash $176 185 $185 185 Dervice revenue Dervice revenue Receed $ ! cash or riding ees) lHeceivedo cash for riding fees $90 31-May Maintenance and Reps30 -May Maintenance and Repairs Expense Expense $90 $90 Accounts Receivable Accounts Payable Received bill of $90 from carpenter for repair services performed) Received bill of $30 from carpenter for repair services performed]