Question

Nelson Company experienced the following transactions during Year 1, its first year in operation.

1. Issued $6,800 of common stock to stockholders.
2. Provided $3,100 of services on account.
3. Paid $1,800 cash for operating expenses.
4. Collected $2,300 of cash from accounts receivable.
5. Paid a $140 cash dividend to stockholders.
The amount of net income recognized on Nelson Company's Year 1 income statement is ______.
Multiple Choice:
A. $1,300.
B. $1,160.
C. $940.
D. $800.

Answer 1

Option (A) is correct.

Step-by-step explanation:

Given that,

Issued common stock to stockholders = $6,800

Provided services on account = $3,100

Paid cash for operating expenses = $1,800

Collected cash from accounts receivable = $2,300

Paid cash dividend to stockholders = $140

Net Income:

= Service revenue - Operating expense

= $3,100 - $1,800

= $1,300

Therefore, the amount of net income recognized on Nelson Company's Year 1 income statement is $1,300.