Problem 14 (20 Points)

Green stream Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered.

GREENSTREAM INSURANCE AGENCY

Income Statement

For the Month Ended May 31

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Revenues

Service Revenue ........................................................................... $50,000

Expenses

Salaries and Wages Expense ........................................................ $12,000

Advertising Expense ...................................................................... 800

Rent Expense ................................................................................. 4,200

Depreciation Expense .................................................................... 2,800

Total Expenses .............................................................................. 19,800

Net Income .............................................................................................. $30,200

Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information:

1. A utility bill for $1,500 was received on the last day of the month for electric and gas service for the month of June.

2. A company insurance salesperson sold a life insurance policy to a client for a premium of $10,000. The agency billed the client for the policy and is entitled to a commission of 25%.

3. Supplies on hand at the beginning of the month were $2,500. The agency purchased additional supplies during the month for $1,500 in cash and $1,000 of supplies were on hand at June 30.

4. The agency purchased a new car at the beginning of the month for $48,000 cash. The car will depreciate $12,000 per year.

5. Salaries owed to employees at the end of the month total $6,000. The salaries will be paid on July 5.

Instructions:

Prepare a corrected income statement.