Q31E_2 - Horngren'S Financial And Managerial Accounting

Question

Requirements 

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

2. What does the income statement report?

Step-by-Step Solution

Answer

(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 1: Calculation of net income

Net income is calculated as follows:

Net Income = Total Revenues - Total Expenses

                     = $15,000 - $3,300

                     = $11,700

Step 2: Explanation of net income

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