Question

Revenue on account amounted to 5,400. Cash collections of accounts receivable amounted to 3,350. Expenses for the period were 2,800. The company paid dividends of 800. What was the net income for the period?

Answer 1

The net income for the period is $2,600, calculated by subtracting the period's expenses of $2,800 from the revenue on account of $5,400. Cash collections on accounts receivable and dividends paid are not factored into this net income calculation.

Step-by-step explanation:

To calculate the net income for the period, we need to consider the revenue on account, cash collections, expenses, and dividends paid. The revenue on account amounted to $5,400, but we also need to adjust this figure for the cash collections from accounts receivable, which amounted to $3,350. However, when calculating net income, the cash collections do not affect revenue, as they are simply a change in the form of the asset (from receivables to cash). Therefore, the total revenue remains at $5,400 for this period. Next, we subtract the expenses for the period, which were $2,800. Dividends do not factor into the calculation of net income because they are a distribution of earnings, not an expense.

Based on the information provided, the calculation for net income is:

• Total Revenue: $5,400
• Less: Expenses: $2,800
• Net Income: $2,600

We arrive at a net income of $2,600 for the period after subtracting expenses from revenue, ignoring the dividends paid and cash collections on accounts receivable for the purpose of this calculation.