Question

ABC Corporation has noticed the following transactions havent been account for in its income statement for the year ended December 31, 2017: • Repairs of $4,650 were made in December and will be paid January 3, 2018. • The electricity bill of $800 for December was received and will be paid January 20, 2018. • The wages of $3,550 for January 2018 was paid on December 28, 2017. • At the beginning of October, the firm paid $1,800 for insurance for the months November and December of 2019, and January of 2020. What is the proper amount of expenses to be included in the income statement for the year

Answer 1

Answer:

The proper amount of expenses to be included in the income statement for the year is $6,650

Explanation:

The computation of the expense amount which is included in the income statement is shown below:

= Repair expenses + electricity bill + insurance expense

= $4,650 + $800 + $1,200

= $6,650

The insurance expenses are given for the three months but we have to calculate for the 2 months only  

So for two months = $1,800 × 2 ÷ 3 = $1,200

And, the wages are given for the last year which is not included in the income statement as it shows outstanding wages. So, we do not consider it.