Prior to Making Any Adjusting Entries, Terra Corporation Had Net

question 30

Multiple Choice

Prior to making any adjusting entries, Terra Corporation had net income of $155,100. The following adjusting entries were made: salaries payable, $1,574; interest earned on short-term investments but not yet recorded or collected, $7,268; adjustment to prepaid insurance for $5,538 for an insurance policy that expired during the period; and fees of $586 collected in advance that have now been earned. After recording these adjustments, net income would be

• A) $170,084
• B) 158,008
• C) 155,842
• D) 155,836

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Definitions:

Variable Costs

Costs that vary directly with the level of production or service volume, such as materials and labor.

Fixed Costs

Costs that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums, remaining constant regardless of the level of business activity.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Required Sales

Required sales represent the amount of sales needed to achieve a specific objective, such as covering costs or reaching a profit target.