Question

Following is a list of account balances of Morris Mowing Services as of December 31 of the first year of operations.

Accounts Receivable $4,000
Accounts Payable. 6,000
Salaries Expense 7,000
Repairs Expense 800
Truck 11,000
Equipment 8,000
Notes Payable 23,400
Cash 11,000
Supplies Expense 8,000
Service Revenue 23,400
Gasoline Expense 7,100
Salaries Payable 1,500

Calculate the net income.

A. $200
B. $29,900
C. $500
D. $30,100

Answer 1

Net income is calculated by subtracting total expenses from total revenues for Morris Mowing Services, resulting in a net income of $500, which is option C.

Step-by-step explanation:

The question involves calculating the net income for Morris Mowing Services as of December 31 of the first operational year. To ascertain net income, we need to subtract total expenses from the total revenues. Below is the calculation of net income:

• Service Revenue: $23,400
• Total Expenses (Salaries Expense + Repairs Expense + Supplies Expense + Gasoline Expense): $7,000 + $800 + $8,000 + $7,100 = $22,900

Net Income = Service Revenue - Total Expenses = $23,400 - $22,900 = $500.

The correct option is therefore C. $500.