Tutors-Plus Test Prep was organized on May 1, 2013, by Jan Cooper. Jan is a good manager but a poor accountant. From the trial balance prepared by a part-time book-keeper, Jan prepared the following income statement for her fourth quarter, which ended April 30, 2014.Jan suspected that something was wrong with the statement because net income had ever exceeded $40,000 in any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other data.You first look at the trial balance. In addition to the account balances reported above in the income statement, the ledger contains the following additional selected balances at April 30, 2014. Supplies……………….$ 9,800 Prepaid Insurance…………..12,000 Notes Payable……………..15,000You then make inquiries and discover the following.1. Service revenue includes advance payments received for summer classes, in the amount of $75,000.2. There were $2,600 of supplies on hand at April 30.3. Prepaid insurance resulted from the payment of a one-year policy on February 1, 2014.4. The mail in May 2014 brought the following bills: advertising for the week of April 24, $80; repairs made April 18, $2,560; and utilities for the month of April, $530.5. There are six employees who receive wages that total $1,380 per day. At April 30, three days’ wages have been incurred but not paid.6. The note payable is a 8% note dated February 1, 2014, and due on May 31, 2014.7. Income tax of $15,200 for the quarter is due in May but has not yet been recorded.Instructions(a) Prepare any adjusting journal entries required as at April 30, 2014.(b) Prepare a correct income statement for the quarter ended April 30, 2014.(c) Explain to Jan the generally accepted accounting principles that she did not recognize in preparing her income statement and their effect on herresults.
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