Chapter 1, Problem 10E

Analyzing and Interpreting an Income Statement

Three individuals organized Pest Away Corporation on January 1 to provide insect extermination services. The company paid dividends of $10,000 during the year. At the end of the first year of operations, the following income statement was prepared:

	PEST AWAY CORPORATION Income Statement For the Year Ended December 31
Revenues
Service Revenue				$192,000
Sales Revenue				24,000
Total Revenues				216,000
Expenses
Supplies Expense				76,000
Salaries and Wages Expense				33,000
Advertising Expense				22,000
Office Expenses				46,000
Total Expenses				177,000
Net Income				$ 39,000

Required:

1. 1. Did the company generate more revenue from selling goods or providing services to customers?
2. 2. If salaries and wages were to double, how much net income would the company report?
3. 3. If the company paid $20,000 for advertising during the current year, what amount is owed at the end of the year? In what account would the amount still owing be reported?
4. 4. Would the $10,000 of dividends be reported on the balance sheet or statement of retained earnings?