North Star prepared the following unadjusted trial balance at the end of its second year of operations ending December 31.

Account Titles	Debit	Credit
Cash	$ 12,100
Accounts Receivable	6,100
Prepaid Rent	2,420
Equipment	21,100
Accumulated Depreciation		$ 1,010
Accounts Payable		1,010
Income Tax Payable		0
Common Stock		24,900
Retained Earnings		2,200
Sales Revenue		50,300
Salaries and Wages Expense	25,100
Utilities Expense	12,600
Rent Expense	0
Depreciation Expense	0
Income Tax Expense	0
Totals	$ 79,420	$ 79,420

Other data not yet recorded at December 31:

1. Rent expired during the year, $1,210.
2. Depreciation expense for the year, $1,010.
3. Utilities used and unpaid, $9,100.
4. Income tax expense, $400.

Required:

4. Compute the amount of net income using (a) the preliminary (unadjusted) numbers and (b) the final (adjusted) numbers. Had the adjusting entries not been recorded, would net income have been overstated or understated, and by what amount?

OPTIONS FOR NET INCOME BOX:

• overstated
• understated

Complete this question by entering your answers in the tabs below. Net Income Analysis Compute the amount of net income using (a) the preliminary (unadjusted) numbers and (b) the final (adjusted) numbers. a. Preliminary Net Income b. Adjusted Net Income Complete this question by entering your answers in the tabs below. Net Income Analysis Had the adjusting entries not been recorded, would net income have been overstated or understated, and by what amount? Net income by