Question

Before month-end adjustments are made, the February 28 trial balance of Cole’s Enterprise contains revenue of $11,000 and expenses of $8,900. Adjustments are necessary for the following items: • Depreciation for February is $1,200. • Revenue earned but not yet billed is $2,800. • Accrued interest expense is $900. • Revenue collected in advance that is now earned is $2,500. • Portion of prepaid insurance expired during February is $500. Calculate the correct net income for Cole's Enterprise for the month end.

Answer 1

Answer:

net income                        2,200

Explanation:

revenues  11,000

expenses (9,000)

income before adjustment: 2,000

adjusmtent:

depreciation         (1,200)

earned revenue    2,800

interest expense    (900)

insurance expense(500)

net                           200

net income                        2,200

The payment in-advance thecustomer made will not considered revenue as thecompany is now forced to provide this services It is a liability not revenue.