Adjusting draft profit for accounting errors Steps:

• Accrued interest of $3,000 not accounted for: unrecorded expense overstates profit; subtract$3,000.
• Allowance for irrecoverable debts overstated by $4,000: excessive bad debt expense understates profit; add$4,000.
• Depreciation understated by $5,000: insufficient expense overstates profit; subtract$5,000.
• Prepaid rent of $2,000 not accounted for: balance sheet adjustment only (understates assets), with no impact on current-year profit; add$0.

Why C is correct:

• Net adjustment is -$3,000 +$4,000 - $5,000 +$0 = -$4,000;$62,000 - $4,000 =$58,000, per accrual accounting principles requiring profit adjustments for unrecorded or misstated expenses.

Why the others are wrong:

• A ignores allowance correction and treats prepaid as expense reduction: -$3,000 -$5,000 - $2,000 = -$10,000 net ($52,000, but miscalculates to$43,200).
• B subtracts all items as expenses: -$3,000 -$4,000 - $5,000 -$2,000 = -$14,000 ($48,000).
• D treats accrued interest as unrecorded income: +$3,000 +$4,000 - $5,000 +$2,000 = +$4,000 ($66,000).

Final answer: C