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Chapter 1: Q. 12SE (page 35)

Centerpiece Arrangements has just completed operations for the year ended December 31, 2018. This is the third year of operations for the company. The following data have been assembled for the business: Insurance Expense \( 4,500 Salaries Expense \) 46,000 Service Revenue 70,000 Accounts Payable 17,600 Utilities Expense 1,400 Office Supplies 1,700 Rent Expense 16,000 Dividends 4,800 Common Stock 9,000 Accounts Receivable 8,000 Cash 7,200 Equipment 12,100 Retained Earnings, January 1, 2018 5,100

Preparing the income statement Prepare the income statement of Centerpiece Arrangements for the year ended December 31, 2018.

Short Answer

Expert verified
Centerpiece Arrangements

Income Statement

Year Ended December 31, 2018

Revenues

Service Revenue

$70,000

Expenses

Insurance Expense

4,500

Utilities Expense

1,400

Rent Expense

16,000

Salaries Expense

46,000

Total Expenses

67,900

Net Income

$2,100

Step by step solution

01

Explanation of net income

Net income is generated when total revenues are higher than the total expenses

02

Calculation of net income

Net income is calculated as follows :

NetIncome=TotalRevenues-TotalExpenses=$70,000-$67,900=$2,100

Thus, net income is $2,100.

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Most popular questions from this chapter

Suppose you are starting a business, Wholly Shirts, to imprint logos on T-shirts. In organizing the business and setting up its accounting records, you take your information to a CPA to prepare financial statements for the bank. Name the organization that governs the majority of the guidelines that the CPA will use to prepare financial statements for Wholly Shirts. What are those guidelines called?

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Consider the following accounting terms and definitions, and match each term to the definition:

1. Accounting equation

2. Asset

3. Balance sheet

4. Expense

5. Income statement

6. Liability

7. Net income

8. Net loss

9. Revenue

10. Statement of cash flows

11. Statement of retained

earnings

a. An economic resource that is expected to be of benefit

in the future

b. Debts that are owed to creditors

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d. Excess of total revenues over total expenses

e. The basic tool of accounting, stated as

Assets = Liabilities + Equity

f. Decreases in equity that occur in the course of selling

goods or services

g. Increases in equity that occur in the course of selling

goods or services

h. Reports on a business鈥檚 cash receipts and cash payments

during a period

i. Reports on an entity鈥檚 assets, liabilities, and stockholders鈥�

equity as of a specific date

j. Reports on an entity鈥檚 revenues, expenses, and net

income or loss for the period

k. Reports how the company鈥檚 retained earnings balance

changed from the beginning to the end of the period

How does retained earnings increase? What are the two ways that retained earnings decreases?

Match each example with a component of a computerized accounting information system. Components may be used more than once.

ExampleComponent
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