Question

Nona Curry started her own consulting firm, Curry Consulting Inc., on May 1, 2022. The following transactions occurred during the month of May. May 1 Stockholders invested $ 15,000 cash in the business in exchange for common stock. 2 Paid $ 600 for office rent for the month. 3 Purchased $ 500 of supplies on account. 5 Paid $ 150 to advertise for the month in the County News. 9 Performed services for customer for $ 1,400 cash. 12 Paid $ 200 cash dividend. 15 Performed $ 4,200 of services on account. 17 Paid $ 2,500 for employee salaries. 20 Paid for the supplies purchased on account on May 3. 23 Received a cash payment of $ 1,200 for services performed on account on May 15. 26 Borrowed $ 5,000 from the bank on a note payable. 29 Purchased office equipment for $ 2,000 paying $ 200 in cash and the balance on account. 30 Paid $ 180 for utilities.Prepare an income statement for the month of May 2022.

Answer 1

To prepare an income statement for Curry Consulting Inc. for May 2022, we compute total revenues of $6,800 and total expenses of $3,930, resulting in a net income of $2,870 for the month.

Step-by-step explanation:

To create an income statement, we need to calculate the total revenues and subtract the expenses to determine the net income. Let's go through the transactions and classify them accordingly.

Revenues

• Cash received from services performed: $1,400 (May 9) + $4,200 (May 15, performed on account) = $5,600
• Received cash payment for services performed on account: $1,200 (May 23)

Expenses

• Office rent: $600 (May 2)
• Supplies: $500 (May 3, paid on May 20)
• Advertising: $150 (May 5)
• Employee salaries: $2,500 (May 17)
• Utilities: $180 (May 30)

We do not include the following transactions in the income statement: issuance of stock, dividend payments, notes payable, and equipment purchase as these are not revenue or expense items for the period.

Income Statement Calculation

Total Revenues: $5,600 + $1,200 = $6,800

Total Expenses: $600 + $500 + $150 + $2,500 + $180 = $3,930

Net Income: Total Revenues - Total Expenses = $6,800 - $3,930 = $2,870

Note: The transactions related to the payment of supplies and the purchase of office equipment are not considered as expenses in the income statement directly, but the cost of supplies used would be. For simplicity, all the supplies purchased are treated as used in this period.