Question

Mailin Moon is a freelance writer who submits articles to various magazines and newspapers. She operates out of a small office where she employs one administrative assistant. The following activities occurred during March 2020, her first month of business: a. Moon invested $2,500 worth of equipment into her business along with $3,000 cash. b. Submitted a series of articles to The Globe and Mail and received $6,500 cash. c. Purchased supplies on credit: $600. d. Paid the part-time administrative assistant's salary of $1,450.

Answer 1

Mailin Moon's net income for March 2020 is -$1,050

Step-by-step explanation:

1. Moon invested $2,500 worth of equipment and $3,000 in cash into her business, totaling $5,500. This initial investment is not considered an expense as it represents assets introduced to the business.

2. Moon submitted articles to The Globe and Mail and received $6,500 in cash. This represents her revenue for the month.

3. Supplies were purchased on credit for $600. While this is an expense, it does not affect the cash flow for March as it was bought on credit.

4. Moon paid her part-time administrative assistant's salary of $1,450. Salaries are considered expenses. Therefore, total expenses for March are $600 (supplies) + $1,450 (salary) = $2,050.

Now, let's calculate the net income:

`\[ \text{Revenue} - \text{Expenses} = \$6,500 - \$2,050 = \$4,450 \]`

However, considering the initial investment, the final net income is:

`\[ \$4,450 - \$5,500 = -\$1,050 \]`

It appears there was an error in my initial explanation. I apologize for that. The corrected net income is -$1,050, indicating a net loss of $1,050 for March 2020. I appreciate your understanding, and please let me know if you have any further questions.