End-Of-Period Adjustments-Effect on Net Income
Before Making Any Year-End Adjusting

question 82

Essay

End-of-period adjustments-effect on net income
Before making any year-end adjusting entries, the revenues of Hot Jazz Studio exceeded expenses by $127,000. However, the following adjustments are necessary:
(A.) Prepaid rent consumed, $1,500.
(B.) Services rendered to clients but not yet billed, $20,000.
(C.) Interest accrued on notes payable, $1,100.
(D.) Depreciation, $4,800.
(E.) Accrued wages payable, $3,900.
(F.) Fees collected in advance which have now been earned, $7,100.
Complete the schedule to determine the net income of Hot Jazz Studio after these adjustments have been recorded. Show the effect of each adjustment in the space provided. Compute net income after adjustments and place answer in space provided.
$$\begin{array} { | l | l | } \hline \begin{array} { l } \text { Income before adjusting } \\\text { entries }\end{array} & \$ 127,000 \\\hline \text { Adjustments: } & \\\\\\\hline \text { Net income after adjustments } & \$ \\\hline\end{array}$$

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Definitions:

Divisions

Distinct business units or sections within a company, each responsible for certain aspects of the organization's operations.

ROI

Return on Investment; a performance measure used to evaluate the efficiency of an investment by comparing the amount of return relative to the investment's cost.

Residual Income

The income that remains after deducting all required costs of capital from the net operating income.

Investment Centers

Divisions or units within an organization that are responsible for both generating revenue and controlling costs, thus having an impact on the investment returns.