Reference no: EM132908829

Green Day Insurance Agency prepares monthly financial statements. Presented below is an income statement for the month of June that is correct on the basis of information considered.

Revenues

Service Revenue ........................................................................... $45,000

Expenses

Salaries and Wages Expense ........................................................ $10,000

Advertising Expense ...................................................................... 1,000

Rent Expense ................................................................................. 4,000

Depreciation Expense .................................................................... 3,000

Total Expenses .............................................................................. 18,000

Net Income .............................................................................................. $27,000

Additional Data: When the income statement was prepared, the company accountant neglected to take into consideration the following information:

1. A utility bill for $1,500 was received on the last day of the month for electric and gas service for the month of June.

2. A company insurance salesperson sold a life insurance policy to a client for a premium of $10,000. The agency billed the client for the policy and is entitled to a commission of 25%.

3. Supplies on hand at the beginning of the month were $2,100. The agency purchased additional supplies during the month for $1,600 in cash and $1,100 of supplies were on hand at June 30.

4. The agency purchased a new car at the beginning of the month for $48,000 cash. The car will depreciate $4,800 per year.

5. Salaries owed to employees at the end of the month total $3,000. The salaries will be paid on July 5.

Instructions:

Problem 1: Prepare a corrected income statement.