Chapter3: Business Income And Expenses
Section: Chapter Questions
Problem 22MCQ
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Question
On 1 January 2020, Michael invested £13,000 in a car wash business in front of his house. He used part of the money to buy equipment for £3,000 and supplies worth £1,000 good for 1.5 years. During the first year of operations, the business received only £5,000 after rendering car wash services. Michael prepared the following income statement for the year ended 31 December 2020. He asked your help to assess the presentation of the relevant information in his income statement.
Michael Car Wash
Income Statement
For the year ended 31 December 2020
(£)
Service revenue 5,000
Less expenses:
Equipment 3,000
Supplies 1,000
Salaries 1,200
Electricity and water 150
Income tax 700
Net income (loss) for the month (1,050)
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