Question

The following transactions are July activities of Craig's Bowling, Inc

Answer 1

Answer:

                                 Craig's Bowling, Inc

               Income Statement for the month of July

Sales ($13,300 + $8,000)                                       $21,300

Less: Cost of goods sold                                        ($3,490)

Gross profit                                                              $17,810

Less: Expenses

Insurance ($1,800 / 3)                        $600

Wages                                                 $4,500            

Repair expenses                                $1,800

Electricity bill                                      $2,000

Total expenses                                                        ($8,900)

Net profit                                                                  $8,910

Note:

Note that the purpose of the income statement is to calculate the profit or loss for a specific period, and not the cash flows during that period. Hence, transactions c., d. and e. are not to be recorded in the income statement for the month of July.