Question

The income statement of Cullumber Co. for the month of July shows net income of $2,200 based on Service Revenue $6,100, Salaries and Wages Expense $2,300, Supplies Expense $1,200, and Utilities Expense $400. In reviewing the statement, you discover the following.

1. Insurance expired during July of $600 was omitted.
2. Supplies expense includes $150 of supplies that are still on hand at July 31.
3. Depreciation on equipment of $250 was omitted.
4. Accrued but unpaid salaries and wages at July 31 of $400 were not included.
5. Services performed but unrecorded totaled $700.

Required:
Prepare a correct income statement for July 2017.

Answer 1

Revenue $6,800

Expenses:

• Salaries and Wages Expense ($2,700)
• Supplies Expense ($1,050)
• Depreciation expense ($250)
• Insurance expense ($600)
• Utilities Expense ($400) ($5,000)

Net income $1,800

1) you must add insurance expense

2) you must decrease supplies expense = $1,200 - $150 = $1,050

3) you must add depreciation expense

4) you must increase salaries and wages expense = $2,300 + $400 = $2,700

5) you must increase revenue = $6,100 + $700 = $6,800