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yawa3891 [41]
3 years ago
9

During the course of your examination of the financial statements of Trojan Corporation for the year ended December 31, 2015, yo

u come across several items needing further consideration. Currently, net income is $94,000
a. An insurance policy covering 12 months was purchased on October 1, 2015, for $20,400. The entire amount was debited to Prepaid Insurance and no adjusting entry was made for this item in 2015.
b. During 2015, the company received a $3,400 cash advance from a customer for services to be performed in 2016. The $3,400 was incorrectly credited to Service Revenue.
c. There were no supplies listed in the balance sheet under assets. However, you discover that supplies costing $2,450 were on hand at December 31, 2015.
d. Trojan borrowed $64,000 from a local bank on September 1, 2015. Principal and interest at 9% will be paid on August 31, 2016. No accrual was made for interest in 2015.
Business
1 answer:
SVETLANKA909090 [29]3 years ago
6 0

Answer:

<em>adjusted income:  92,830</em>

<em>adjusted income:  92,830</em>

<em>adjusted income:  92,830</em>

Explanation:

a) 20,400 contract for a year

20,400 / 12 = 1,700 value per month

from Oct 1st to Dec 31th:  3 months for a total of 5,100 expense

b) we should decrease revenue by 3,400

c) we should reverse 2,450 supplies expense and post under supplies

d) principal x rate x time = interest

64,000 x 0.09 x 4/12 = 1,920 interest expense

94,000 - 5,100 insurance expense + 3,400 unearned revenue +2,450 reversing of supplies expense - 1,920 interest expense

<em>adjusted income:  92,830</em>

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Answer:

The Journal entries are as follows:

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