Question

Greenstream 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 June 30
Revenues
Service Revenue $40,000
Expenses
Salaries and Wages Expense $12,000
Advertising Expense 800
Rent Expense 4,200
Depreciation Expense 2,800
Total Expenses 19,800
Net Income 20,200
Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information:
1. A utility bill for $1,200 was received on the last day of the month for electric and gas service for the month of June.
2. A company insurance salesman 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 20%.
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 $1,200 of supplies were on hand at June 30.
4. The agency purchased a new car at the beginning of the month for $24,000 cash. The car will depreciate $6,000 per year.
5. Salaries owed to employees at the end of the month total $5,300. The salaries will be paid on July 5.
Instructions:
Prepare a corrected income statement.

Answer 1

Answer:

Net Income $12,400

Explanation:

Preparation of a corrected income statement.

GREENSTREAM INSURANCE Agency Income Statement For the Month Ended June 30

RevenuesService Revenue $42,000

[$40,000 +(20%* $10,000).]

Expenses:

Salaries and Wages Expense $17,300

($12,000 + $5,300)

Rent Expense 4,200

Depreciation Expense 3,300

($2,800 + $500)

Supplies Expense 2,800

($0 + $2,800)

Utilities Expense 1,200

($0 + $1,200)

Advertising Expense 800

Total expenses 29,600

Net Income $12,400

(42,000-29,600)

Therefore the net income for the corrected income statement will be $12,400