Question

Lewis Company began operations on February 1, 2016, and experienced the following events during the year:

1. Earned $300,000 of revenue on account.
2. Collected $250,000 cash from accounts receivable.
3. Paid $110,000 cash for salaries expense.
4.
Adjusted the accounting records to reflect management's belief that $6,000 of the accounts receivable balance would be uncollectible. Lewis uses the allowance method of accounting for uncollectible accounts.


What is the Lewis Company's net income for 2016?

A) $184,000

B) $190,000

C) $250,000

D) $300,000

Answer 1

A) $184,000

Step-by-step explanation:

The company uses the allowance method of accounting for uncollectible accounts, so the expense for bad debt to adjust Allowance for Doubtful Accounts: $6,000

The table below describes the way of calculating net income in 2016:

Revenue (1) $300,000

Salaries expense (2) $110,000

Bad debt expense (3) $6,000

Net income (1)-(2)-(3) $184,000