Part B: Cash to accrual review.
Before month-end adjustments are made, the December 2025 trial balance of Entity B
contains revenue of $11,000 and expenses of $8,900, so net income before any
adjustments would be $2,100 ($11,000-$8,900).
Instructions: In the table below, indicate whether each item should be added (+),
subtracted (-) or would have no effect (NE) in arriving at accrual basis net income and
then calculate accrual net income.
Net income before adjustments ($11,000 - 8,900)
Item
1. Depreciation for December is $1,200
2. Accrued interest expense is $900.
3. Revenue recognized but not yet billed is $2,800.
4. Revenue collected in advance that is now recognized
is $2,500.
5. Portion of prepaid insurance expired during December
is $500.
Net income after adjustments
Hint: Net income after adjustments is $4,800.
$ 2,100
Adjustment