Question

Ollie Company experienced the following events during its first-year operations:

a. Acquired $72,000 cash from the issue of common stock.
b. Borrowed $26,000 from the First City Bank.
c. Earned $59,000 of cash revenue.
d. Incurred $43,000 of cash expenses.
e. Paid a $7,000 cash dividend.
f. Paid $43,000 to purchase land.

Required:
a. Identify the events that will affect the income statement.
b. Prepare an income statement that shows the results of Year 1 operations.

Answer 1

a. Events that will affect the income statement are :

1. Part c
2. Part d

b. Income statement that shows the results of Year 1 operations.

Revenue Earned $59,000

Less Expenses :

Expenses ($43,000)

Net Income / (Loss) $16,000

Step-by-step explanation:

The Income Statement shows the Profit or Loss that resulted during the reporting period.

Only items of Revenue/Income and Revenue Expenditures (Expenses) are accounted for in Income Statement.

Profit or Loss = Sales less Expenses