Question

A company completed the following transactions during the month of October:

I.Purchased office supplies on account,  $4400.

II.Provided services for cash,  $22,000.

III.Provided services on account,  $13,000.

IV.Collected cash from a customer on account,  $8800.

V.Paid the monthly rent of  $16,000.

What was the company's net income for the month?

$13,000

$51,000

$19,000

$35,000

Answer 1

$19,000

Working:

Net income for the month is calculated by taking into account all incomes and expenses.

Provided services for cash

$       22,000

Provided services on account

$       13,000

Total Income

A

$       35,000

Monthly Rent

$       16,000

Total Expense

B

$       16,000

Net Income

A-B

$       19,000

Note:

Effect

I.Purchased office supplies on account, $4400.

Assets will increase along with increase in liability.So, there is no income or expense effected.

IV.Collected cash from a customer on account, $8800.

Only one asset will increase(Cash) and other will decrease (Accounts receivable).There is no income or loss effected.