Question

At January 1 (beginning of its fiscal year), Conover, Inc., a financial services consulting firm, reported the following account balanoes (in thousands of dollars, except number of shares and par value per share):

Cash $2,000
Short-term investments 460
Accounts receivable 3,720
Supplies 200
Prepaid expenses 4,920
Office equipment 1,630
Accumulated depreciation-office equipment 430
Accounts payable $260
Unearned revenue 1,420
Salaries Payable 970
Short-term note payable 830
Common stock ($1 par value) 55
Additional paid-in capital 6,805
Retained earnings 2,160

a. Received $10,500 cash for consulting services rendered. Issued 20 additional shares of common stock at a market price of $125 per share.
b. Purchased $740 of office equipment, paying 25 percent in cash and owing the rest on a short-term note.
c. Received $940 from clients for consulting services to be performed in the next year.
d. Bought $570 of supplies on account. Incurred and paid $1,950 in utilities for the current year.
e. Consulted for clients in the current year for fees totaling $1,720, due from clients in the next year.
f. Received $3,280 from clients paying on their accounts. Incurred $6,310 in salaries in the current year, paying $5,450 and owing the rest (to be paid next year).
g. Purchased $1,330 in short-term investments and paid $850 for insurance coverage beginning in the next fiscal year.
h. Received $15 in interest revenue earned in the current year on short-term investments.

Required:
Preparing an Income Statement .

Answer 1

Answer and Explanation:

The preparation of the income statement is shown below:

CONOVER INC.

Income statement

Operating Revenues

Consulting Service Revenue($10,500 + $1,720) $12,220

Total Operating Revenue $12,220

Less: Operating Expenses

Utilities Expense $1,950

Salaries Expense $6,310

Total Operating Expenses $8,260

Net Operating Income $3,960

Add: Other Items

Interest Revenue $15

Net Income $3,975