Question

Prepare an income statement for May assuming the following data are not included above: (1) $900 worth of services were performed and billed but not collected at May 31, and (2) $1,000 of gasoline expense was incurred but not paid.

Answer 1

To prepare an income statement for May, include the $900 revenue as accounts receivable and the $1,000 expense as accounts payable. The net income for May is -$100.

Step-by-step explanation:

To prepare an income statement for May, we need to take into account the two additional pieces of information given:

1. $900 worth of services were performed and billed but not collected at May 31. This means that $900 of revenue should be included in the income statement as accounts receivable.
2. $1,000 of gasoline expense was incurred but not paid. This means that $1,000 should be included as an expense in the income statement as accounts payable.

• Income Statement for May:
  Revenues
  Service Revenue $900
  
  Expenses
  Gasoline Expense $1,000
  
  Net Income
  Total Revenues $900
  Total Expenses $1,000
  Net Income $-100

Answer 2

Income statement.

Revenue 900

Expenses 1.000

Loss -100

Step-by-step explanation:

(1) $900 worth of services were performed and billed but not collected at May 31

Accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected.

(2) $1,000 of gasoline expense was incurred but not paid.

In accrual accounting, the revenue recognition principle states that expenses should be recorded during the period in which they are incurred, regardless of when the transfer of cash occurs