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Chapter 1: Q 34E (page 42)

Prepare the income statement for Damon Design Studio for the year ending December 31, 2018.

Short Answer

Expert verified

Income statement is shown as follows:

Damon Design Studio

Income Statement

Year Ended December 31, 2018

Revenues

Service Revenue

$154,600

Expenses

Rent Expense

23,000

Salaries Expense

65,000

Property Tax Expense

2,200

Utilities Expense

7,200

Miscellaneous Expense

3,800

Total Expenses

101,200

Net Income

$53,400

Step by step solution

01

Explanation of income statement

Income statement reports the total revenues , total expenses and net income (loss) for the period.

02

Calculation of net income

Net income is calculated as follows:

NetIncome=TotalRevenues-TotalExpenses=$154,600-$101,200=$53,400

Thus, net income is $53,400

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Cosmo Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December: Dec. 1 Received \(19,000 cash from Thomas in exchange for common stock. 2 Received \)3,800 cash from customers for services performed. 5 Paid \(300 cash for office supplies. 9 Performed services for a customer and billed the customer for services rendered, \)4,500. 10 Received \(150 invoice for utilities due in two weeks. 15 Paid for advertising in the local paper, \)350. 20 Paid utility invoice received on Dec. 10. 25 Collected cash in full from customer billed on Dec. 9. 28 Paid rent for the month, \(2,600. 28 Paid \)1,200 to assistant for wages. 30 Received \(1,600 cash from customers for services performed. 31 Cash dividends of \)3,000 were paid to stockholders. Analyze the effects of the transactions on the accounting equation of Thomas Gymnastics using a format similar to Exhibit 1-6.
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