Question

Clayton Consulting operates a website that links experienced statisticians with businesses that need data analyzed. Statisticians post their rates, qualifications, and references on the website, and Clayton receives 25% of the fee paid to the statisticians in exchange for identifying potential customers. Lovelace Associates contacts Clayton and arranges to pay a consultant $4,500 in exchange for analyzing some data. Clayton's income statement would include the following with respect to this transaction:

a. Revenue of $4,500
b. Revenue of $4,500, and cost of services of $3,375
c. Revenue of $1,125
d. Revenue of $5,625 and cost of services of $4,500

Answer 1

Clayton Consulting's income statement for the transaction with Lovelace Associates would show a revenue of $1,125, which represents the 25% commission it earns from the consultant's fee paid by Lovelace.So the correct statement regarding Clayton's income statement for this transaction would be option c: Revenue of $1,125.

Step-by-step explanation:

Clayton Consulting is involved in a transaction where it connects statisticians with businesses and earns a commission for its service. When Lovelace Associates pays a consultant $4,500, Clayton receives 25% of that fee. To determine which option represents Clayton's income statement with regard to this transaction, you need to calculate the revenue that Clayton would recognize and any associated costs.

The revenue earned by Clayton is 25% of $4,500, which is $1,125. There are no additional costs indicated for Clayton, so the cost of services would be the amount paid to the statisticians, which is the remaining 75% of the total fee, or $3,375.