Question

Before month-end adjustments are made, the February 28 trial balance of Neutral Milk Hotel contains revenue of $7,000 and expenses of $4,400. Adjustments are necessary for the following items: Depreciation for February is $1,800. Revenue recognized but not yet billed is $2,700. Accrued interest expense is $700. Revenue collected in advance that is now recognized is $2,500. Portion of prepaid insurance expired during February is $400.InstructionsCalculate the correct net income for Neutral Milk Hotel’s Income Statement for February.

Answer 1

Answer: $4,900

Step-by-step explanation:

Net income will be:

= (Revenue + Revenue recognized but not yet billed + Revenue collected in advance that is now recognized) - Expenses - Depreciation - Accrued interest expense - Portion of prepaid insurance for the month

= (7,000 + 2,700 + 2,500) - 4,400 - 1,800 - 700 - 400

= $4,900