Question

Holmes Cleaning Service began operation on January 1, 2018. The company experienced the following events for its first year of operations:

Events Affecting 2018:
Provided $170,000 of cleaning services on account.
Collected $127,500 cash from accounts receivable.
Paid salaries of $28,000 for the year.
Adjusted the accounts to reflect management's expectations that uncollectible accounts expense would be $1,900. The expense was determined using the percent of revenue method.


Prepare an income statement

Answer 1

To prepare the income statement for Holmes Cleaning Service, calculate the revenue and expenses. The net income is $267,600.

Step-by-step explanation:

To prepare an income statement for Holmes Cleaning Service, we need to calculate the revenue and expenses. Based on the given information, the company provided $170,000 of cleaning services on account and collected $127,500 cash from accounts receivable. This indicates that the revenue for the year is $297,500.

The company paid salaries of $28,000 for the year, which is an expense. Additionally, the management adjusted the accounts to reflect an expected uncollectible accounts expense of $1,900, determined using the percent of revenue method. Therefore, the total expenses for the year are ($28,000 + $1,900) $29,900.

To calculate the net income, we subtract the total expenses from the revenue: $297,500 - $29,900 = $267,600. Therefore, the net income, which is the final answer for the income statement, is $267,600.