Trueman Company started business in 2011 and sells uniforms for the restaurant industry. Trueman works with various manufacturers, i.e., suppliers, who produce the uniforms. Trueman is allowed to buy on credit with payments due in 30-45 days. Trueman's customers can buy uniforms on account,but are expected to pay within 30 days. Customers can return the uniforms to Trueman within 30 days for a refund.

Trueman follows U.S. GAAP in preparing its financial statements and has a December 31 fiscal year end. The following is a list of accounts and their unadjusted balances for Trueman Company at December 31, 2017.

Unadjusted

Account Name Balance 12/31/17

Cash 7,700

Accounts receivable 13,270

Allowance for Bad Debts 250

Inventory 250

Supplies 1,060

Prepaid rent 1,500

Equipment 45,150

Accumulated deprec- equip 9,080

Accounts payable 845

Long-term notes payable 7,000

Common stock 4,000

Retained earnings 15,305

Dividends paid 20,000

Sales 213,400

Sales returns 11,000

Cost of goods sold 82,000

Rent expense 12,000

Salaries expense 45,400

Supplies expense 4,700

Interest income 1,250

1. What is Trueman's net income before adjustments?
2. Brady Trueman, the owner of Trueman Company, earned his MBA from the GSM at UC Davis, and remembered that an important step before preparing financial statements is to update the accounts using accrual, deferral, cost allocation, and

Recent contracts, Brady decides the following adjustments are needed:

1. Brady estimates that 3% of the ending accounts receivable balance will not be collected, i.e., Brady is applying the aging of accounts receivable method in estimating bad debt expense. Please round to the nearest dollar.

2. One type of uniform in ending inventory will not be sold at its normal profit margin because of falling demand. Brady estimates an inventory impairment of $500

3. $400 of supplies remain on hand at December 31

4. Equipment is depreciated over a 5 year life with no salvage. All pieces of equipment were put in operation before 1/1/17 (no partial year depreciation needs to be recorded).

5. The long term notes payable is due on 12/31/2021, and has a stated interest rate of 8% annually. The interest will be paid on Jan. 1, 2018.

6. Brady forgot that a customer had returned $3,000 worth of aprons. The aprons had cost Trueman Company $2,000. The aprons were in the supplies closet but were not included in the supplies account nor in the inventory account. The customer has not yet received a refund but expects one by Jan. 5, 2018.

Prepare an income statement for the year ended December 31, 2017 and balance sheet as of December 31, 2017 for Trueman Company