During the conduct of the audit of the financial statements of ABC Incorporated dated December 31, 2021, the following information were determined: Inventory on January 1, 2021 is understated by 30,000.On May 1, 2021, sales made to a customer on account was recorded by debiting cash of 500,000 and crediting other income of 500,000.Payment of 100,000 insurance covering 10 months starting June 1, 2021, was not recorded.Inventory on December 31, 2021 is overstated by 40,000On June 1, 2021, ABC paid 240,000 in payment for 24 months of rent. This was originally charged to an expense account. As of the end of the year, no adjustments were made yet.ABC failed to accrue salaries of their office workers amounting to 38,000.A note was received from a customer amounting to 150,000 on May 1, 2021. The note bears an interest of 15% and will mature after 25 months. No entries were made yet with respect to the accrual of interest. The net income of ABC before reflecting any corrections was 1,780,000.Determine the corrected net income of ABCProvide all the necessary adjusting entries assuming the books in 2021 are already closedProvide all the necessary adjusting entries assuming the books in 2021 are still open

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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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During the conduct of the audit of the financial statements of ABC Incorporated dated December 31, 2021, the following information were determined:

Inventory on January 1, 2021 is understated by 30,000.
On May 1, 2021, sales made to a customer on account was recorded by debiting cash of 500,000 and crediting other income of 500,000.
Payment of 100,000 insurance covering 10 months starting June 1, 2021, was not recorded.
Inventory on December 31, 2021 is overstated by 40,000
On June 1, 2021, ABC paid 240,000 in payment for 24 months of rent. This was originally charged to an expense account. As of the end of the year, no adjustments were made yet.
ABC failed to accrue salaries of their office workers amounting to 38,000.
A note was received from a customer amounting to 150,000 on May 1, 2021. The note bears an interest of 15% and will mature after 25 months. No entries were made yet with respect to the accrual of interest.

The net income of ABC before reflecting any corrections was 1,780,000.

Determine the corrected net income of ABC
Provide all the necessary adjusting entries assuming the books in 2021 are already closed
Provide all the necessary adjusting entries assuming the books in 2021 are still open

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