Question

Before any month-end adjustments are made, the net income of Russell Company is $66,000. However, the following adjustments are necessary: office supplies used, $2,160; services performed for clients but not yet recorded or collected, $2,640; interest accrued on note payable to bank, $2,040. After adjusting entries are made for the items listed above, Russell Company's net income would be:

Answer 1

Answer:

The Russell Company's net income would be $64,440

Explanation:

The computation of adjusted net income is shown below:

= Net income - office supplies used + service performed for clients - interest accrued to bank

= $66,000 - $2,160 + $2,640 - $2,040

= $64,440

The office supplies are an expense so it is deducted

The service performed is an unearned revenue which is an income so it will be added

And, the interest is accrued to the bank which is also an expense so it will also be deducted. If the question says from the point of the lender, so it will be added.

Hence, the Russell Company's net income would be $64,440