Question

The following items are taken from the financial statements of the Freight Service for the year ending December 31, 2016:

Accounts payable $ 19,000

Accounts receivable 13,000

Accumulated depreciation – equipment 26,000

Advertising expense 21,200

Cash 15,000

Owner’s capital (1/1/16) 104,000

Owner’s drawings 11,000

Depreciation expense 12,000

Insurance expense 3,800

Note payable, due 6/30/17 72,000

Prepaid insurance (12-month policy) 7,200

Rent expense 16,000

Salaries and wages expense 32,000

Service revenue 135,000

Supplies 5,000

Supplies expense 6,000

Equipment 210,000

What is the company’s net income for the year ending December 31, 2016?

Answer 1

The company's net income for the year ending December 31, 2016, is computed by subtracting the total expenses of $91,000 from the service revenue of $135,000, resulting in a net income of $44,000.

Step-by-step explanation:

To calculate the company's net income for the year ending December 31, 2016, we add all the revenues and subtract all the expenses. The provided financial information includes a Service revenue of $135,000. The expenses include Advertising expense ($21,200), Depreciation expense ($12,000), Insurance expense ($3,800), Rent expense ($16,000), Salaries and wages expense ($32,000), and Supplies expense ($6,000). These expenses total $91,000.

The net income is calculated as follows:

Service Revenue - Total Expenses = Net Income
$135,000 - $91,000 = $44,000

So, the company's net income for the year is $44,000.