Question

James Company experienced the following events during its accounting period:

(1) Purchased $10.000 of inventory on account.
(2) Returned $2,000 of inventory purchased in Event 1.
(3) Paid the remaining balance in account payable for the inventory purchased in Event 1.
(4) Sold inventory purchased in Event 1 for $10,000 to customers on account. At the end of the first accounting period what would be reported on the Income Statement for net income?
Multiple choice:
a.$2,000
b.$8,000
c,$10,000
d.Zero

Answer 1

The net income reported on the Income Statement would be $8,000.

Step-by-step explanation:

Net income is calculated by subtracting the cost of goods sold (COGS) from the total revenue. In this case, the cost of goods sold would be the inventory purchased in event 1 ($10,000) minus the inventory returned in event 2 ($2,000), which equals $8,000. Therefore, the net income reported on the Income Statement would be $8,000.