Question

Best Plumbing Corporation provides plumbing services. Selected transactions of Best Plumbing Corporation are described as​ follows:

​a) Received $6,000 cash and issued common stock to Sharon.
​b) Paid $4,000 cash for equipment to be used for plumbing repairs.
​c) Borrowed $9,000 from a local bank and deposited the money in the checking account.
​d) Paid cash expense for​ rent, $900 for the year.
​e) Paid $200 cash for plumbing supplies to be used next year.
​f) Completed a plumbing repair project for a local lawyer and received $3,000 cash.

Calculate the net income. Assume plumbing supplies of $200 are left.

A. $3,000
B. $2,100
C. $2,800
D. $700"

Answer 1

The net income can be calculated by subtracting the expenses from the revenue.

Step-by-step explanation:

The net income can be calculated by subtracting the expenses from the revenue. In this case, the revenue consists of the cash received from common stock issuance ($6,000) and the cash received from a plumbing repair project ($3,000). The expenses include the cost of equipment ($4,000), rent ($900), and plumbing supplies ($200). Since plumbing supplies of $200 are left, they are not included as an expense.

So, the calculation would be:

Net Income = (Revenues - Expenses)

Net Income = ($6,000 + $3,000) - ($4,000 + $900)

Net Income = $9,000 - $4,900

Net Income = $4,100

Therefore, the correct answer is D. $700.