Question

Kilgore Company experienced the following events during its first accounting period.

(1) Borrowed $10,000 cash from a creditor.
(2) Earned $5,000 of cash revenue.
(3) Paid $2,000 cash to pay off a portion of its note payable.
(4) Paid cash dividends amounting to $100.
(5) Paid $2,200 cash for operating cash expenses.
Based on this information, what is the amount of expense shown on the income statement?

Answer 1

The total expense shown on the income statement for Kilgore Company during the accounting period would be $2,200, which represents the operating cash expenses paid.

Step-by-step explanation:

The amount of expense shown on the income statement for Kilgore Company would include operating expenses that the company has paid in cash. Based on the information given, the total expenses are the sum of cash paid for operating expenses and any other expenses that the company has incurred. To calculate this, we identify all the events that are considered expenses:

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• Event (3) represents a cash payment on a note payable, which is a liability payment, not an expense.
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• Event (4) paid cash dividends are not considered an expense for the business; they're a distribution of earnings.
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• Event (5), the $2,200 paid for operating expenses, is the only true expense in this scenario.

Thus, Kilgore Company's income statement will show $2,200 as the total expense for the accounting period in question.