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Chapter 1: Q31E_2 (page 41)

Requirements

1. Prepare the income statement for Wilson Towing Service for the month ending June 30, 2018.

2. What does the income statement report?

Short Answer

Expert verified

(1) Income statement is shown as follows:

Wilson Towing Service

Income Statement
Year Ended June 30, 2018

Revenues

Service Revenue

$15,000

Expenses

Rent Expense

900

Salaries Expense

2,400

Total Expenses

3,300

Net Income

$11,700

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

Step by step solution

01

Calculation of net income

Net income is calculated as follows:

Net Income = Total Revenues - Total Expenses

= $15,000 - $3,300

= $11,700

02

Explanation of net income

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

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Most popular questions from this chapter

Describe the various types of individuals who use accounting information and how they use that information to make crucial decisions

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 balance sheet

Prepare the balance sheet of Centerpiece Arrangements as of December 31, 2018.

Describe the similarities and differences among the four different types of business entities discussed in the chapter.

What is the role of the Financial Accounting Standards Board (FASB)?

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

c. Excess of total expenses over total revenues

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
See all solutions

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