End-Of-Period Adjustments-Effect on Net Income

question 56

Essay

End-of-period adjustments-effect on net income
Ocean View, Inc. reported revenues of $645,000 and expenses of $360,000 for the month of May, before making any month-end adjusting entries. The following data are provided regarding adjusting entries:
(A.) Portion of insurance expiring in May, $2,520.
(B.) A customer has used the facilities for two weeks in May; the fee of $4,200 has not yet been billed.
(C.) Amount owed for salaries accrued in the last week of May, $1,650.
(D.) Depreciation on equipment for May $1,290.
(E.) Supplies used in May, $13,125.
(F.) Fees collected in advance which have been earned during May, $23,400.
Complete the schedule to determine the net income of Ocean View Inc. for May after these adjustments have been recorded. Begin your schedule with income before adjusting entries and then show the effect of each adjustment to arrive at net income after adjustment.

Use ABC information to calculate product margins.

Evaluate the impact of overhead allocation on product pricing and profitability.

Differentiate between plantwide overhead rates and activity-based costing rates.

Analyze the distribution of resource consumption across activity cost pools using ABC data.

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Definitions:

Risk Averse

Describes individuals or entities that prefer to avoid risk and would rather choose options with more certain outcomes over riskier ones.

Insurance

A financial product that provides protection against potential future losses or damages in exchange for a premium.

Risk Neutral

A condition in which an individual or entity shows indifference between choices that have different levels of risk, focusing solely on potential outcomes regardless of uncertainty.

Expected Level

the anticipated quantity or value in a given context, often based on statistical analysis or previous observations.