7. Before making any month-end adjustments, Bobwhite Company reported $265,000 o

Question

7. Before making any month-end adjustments, Bobwhite Company reported $265,000 of unadj usted income as of March 31, 2013. Adjusting entries are necessary for the following items: ) Depreciation for the month of March: $4,200. efpena (ii) Effective March 1, 2013, Bobwhite took out a 7 month loan totaling $200,000. The loan charges a 6% interest rate (APR) and the principle and interest are both due at maturity. (ii) During March 2013 Bobwhite purchased $1,800 of supplies. The supplies were counted at the end of the month and it was noted that $300 was debited entirely to the income statement, and no additional entries have been made since this time. of supplies were remaining. The March entry to record the purchase (iv) Fees collected in advance during February 2013 and earned in March 2013: $3,600. The February entry to rec have been made since this time. ord the cash collection was credited entirely to the balance sheet, and no additional entries (v) March 1,2013 Bobwhite paid $21,000 for three months of rent on the office building ($7,000 per month). The March 1 entry to record the cash payment was debited entirely to the income statement, and no additional entries have been made since this time. (vi) March 1,2013 Bobwhite paid $21,250 for 85, 60 second radio spots. Bobwhite debited the entire payment to the balance sheet and has made no additional entries. As of March 31, 2013, 55 of the radico spots were used After recording items (i) through (vi) as necessary, Bobwhite's adjusted net income for March is: A. $263,950 B. $262,700 C. $261,68 D. $256,400 E. None of the above

Explanation / Answer

Unadjusted Net Income 265000

Less: Depreciation 4200

Less: Accrued Interest 1000 (200000*6%*1/12)

Add: Supplies Available 300

Add: Fee not treated as income 3600

Add: Rent not accrued 14000 (21000 - 21000*1/3)

Less: Radio Spots 13750 (21250/85*55)

Net Income 263950

The correct answer will be (a)

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