Question

Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of 185,000, expenses of103,700, and withdrew 18,000 from the business during the current year. The owner's capital account before closing had a balance of297,000. The Net Income for the year is:

1) $185,000
2) $63,300
3) $81,300
4) $360,300
5) $378,300

Answer 1

The Net Income for Tara Westmont's Tiptoe Shoes is calculated by subtracting expenses from the annual revenues, which results in $81,300. Correct option is 3)

Step-by-step explanation:

To calculate the Net Income for the year, we subtract the expenses from the annual revenues. Thus, Tara Westmont's Net Income would be:

$185,000 (annual revenues) - $103,700 (expenses) = $81,300 (Net Income).

The withdrawal of $18,000 does not factor into the Net Income calculation as it is an owner's equity transaction, not an expense. The owner's capital account balance before the closing is not required to calculate the Net Income.