A company reported net income of 9.3 million; 10.3 million and 9.7 million for the years2020, 2021 and 2022 respectively. In an audit conducted in 2022, the following wasdetermined:a. Harry failed to accrue interest on the following notes. It was revealed that Harryrecognizes the total interest income on the notes upon its collection on its due date.PrincipalDate ReceivedInterestDue DateNote receivable - A500,000June 1, 202012%October 1, 2021Note receivable - B400,000May 31, 202115%June 30, 2022Note receivable - C750,000October 31, 202018%November 30, 2022b. Harry paid 15 months' rent on June 1, 2022 amounting to 210,000. Harry uses the assetmethod in recording prepayments. No adjustments were made yet concerning this.c. Payment of salaries in 2020 amounting to 380,000 was inadvertently charged against thecash on hand. It should have been charged to cash in bank.d. The ending inventory in 2020 is overstated by 450,000 while the beginning inventory in2022 is understated by 420,000.Determine the adjusted net income in 2020, 2021, 2022

Adjusted net income is the income which has been earned by the company when all the adjustments have…

Answered: Determine the adjusted net income in…

Business

Accounting

Determine the adjusted net income in 2020, 2021, 2022

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company reported net income of 9.3 million; 10.3 million and 9.7 million for the years
2020, 2021 and 2022 respectively. In an audit conducted in 2022, the following was
determined:
a. Harry failed to accrue interest on the following notes. It was revealed that Harry
recognizes the total interest income on the notes upon its collection on its due date.
Principal
Date Received
Interest
Due Date
Note receivable - A
500,000
June 1, 2020
12%
October 1, 2021
Note receivable - B
400,000
May 31, 2021
15%
June 30, 2022
Note receivable - C
750,000
October 31, 2020
18%
November 30, 2022
b. Harry paid 15 months' rent on June 1, 2022 amounting to 210,000. Harry uses the asset
method in recording prepayments. No adjustments were made yet concerning this.
c. Payment of salaries in 2020 amounting to 380,000 was inadvertently charged against the
cash on hand. It should have been charged to cash in bank.
d. The ending inventory in 2020 is overstated by 450,000 while the beginning inventory in
2022 is understated by 420,000.
Determine the adjusted net income in 2020, 2021, 2022

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