Question

Required information [The following information applies to the questions displayed below.] On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed $84,780 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts. Retained earnings, October 1 as $0. Cash $ 8,990 Cash dividends $ 2,830 Accounts receivable 16,540 Consulting revenue 16,540 Office supplies 3,930 Rent expense 4,300 Land 45,980 Salaries expense 7,740 Office equipment 18,660 Telephone expense 850 Accounts payable 9,170 Miscellaneous expenses 670 Common stock 84,780 Using the above information prepare an October income statement for the business.

Answer 1

Answer:

Explanation:

For preparing the income statement, first, we have to compute the net income/net loss for the given period. The calculation is shown below:

= Consulting revenue - rent expense - salaries expense - telephone expense - miscellaneous expense

= $16,540 - $4,300 - $7,740 - $850 - $670

= $2,980

Since for computing the net income/ net loss we have to deduct the expenses from the income/ revenge earned to find out the net income (Revenue - expenses) and for net loss, the reverse method is used (Expenses - revenues)

The preparation of the income statement is done in the spreadsheet. Please find the attachment.