Concept explainers
NET INCOME AND CHANGE IN OWNER’S EQUITY Refer to the
1. a
Determine the total revenue for the month of August.
Explanation of Solution
Revenue is known as “Top line” because it appears very top on the income statement of the company. It is used to imply profits or net income (bottom line) of the company by subtracting the total expenses from total revenues.
Determine the total revenue for the month of August:
Hence, the total revenue for the month of August is $9,800.
1.b
Determine the total expenses for the month of August.
Explanation of Solution
Expense is the cost borne by a company to produce and sell the goods and services to the customers. This involves outflow of cash by making a payment for an individual or company for a particular item and service.
Determine the total expenses for the month of August:
Hence, the total expense for the month of August is $3,300.
1.c
Determine the net income for the month of August.
Explanation of Solution
Net income: The bottom line of income statement which is the result of excess of earnings from operations (revenues) over the costs incurred for earning revenues (expenses) is referred to as net income.
Determine the net income for the month of August:
Hence, the net income for the month of August is $6,500.
2.a
Determine the amount of ending owner’s equity.
Explanation of Solution
Statement of owners’ equity: This statement reports the beginning owner’s equity and all the changes, which led to ending owners’ equity. Additional capital, net income from income statement is added to and a drawing is deducted from beginning owner’s equity to arrive at the result, ending owner’s equity.
Determine the amount of ending owner’s equity:
J Plumbing Repair | ||
Statement of Owner’s Equity | ||
For Month Ended August 31, 20-- | ||
Particulars | Amount ($) | Amount ($) |
Invested cash in the business | 30,000 | |
Add: Net income for August | 6,500 | |
Less: Withdrawals for August | (3,000) | |
Increase in capital | 3,500 | |
Ending owner’s equity | $33,500 |
Table (1)
2.b
Show the accounting equation for the end of month.
Explanation of Solution
Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a company and claims of resources to creditors and owners. Accounting equation is expressed as shown below:
Show the accounting equation for the end of month:
Working note:
Calculate the amount of assets:
Want to see more full solutions like this?
Chapter 3 Solutions
College Accounting, Chapters 1-27
- NET INCOME AND CHANGE IN OWNERS EQUITY Refer to the trial balance of Kohls Home Repair in Problem 3-13A to determine the following information. Use the format provided below.arrow_forwardWhich of the following will appear on the credit side of a trial balance? A. Fixed assets and Rent income B. Expenses and Non-current liabilities C. Negative assets and Income D. Current liabilities and Interest on overdraft Clear my choice Type here to search i packard bellarrow_forwardMultiple choice: What is the service revenue in the adjusted trial balance columns of a worksheet? A. Income statement B. Balance sheet debit C. Income statement credit D. Balance sheet creditarrow_forward
- What is the Unearned service revenue in the adjusted trial balance columns of worksheet? A. Income statement debit B. Balance sheet debit C. Income statement credit D. Balance sheet creditarrow_forwardPlease prepare a full trial balance – Trial Balance, Adjustments, Adjusted Trial Balance, Income Statement, Balance Sheet, and Statement of Owner’s Equity, as well the individual Balance Sheet, Income Statement, and Statement of Owners Equity. Include any journal entries necessary for this assignment. Use T accounts if you find them helpful.arrow_forwardWhat would the Trial balance and Income Statement be?arrow_forward
- TOPIC: Rules of Debit and Credit Instruction: Identify the classification of account. And Choose the letter of the correct answer. Questions: 1. Other Revenue a. Assetsb. Liabilitiesc. Equityd. Income e. Expense 2. Prepaid Renta. Assetsb. Liabilitiesc. Equityd. Income e. Expense 3. Allowance for Doubtful Accountsa. Assetsb. Liabilitiesc. Equityd. Income e. Expense 4. Depreciationa. Assetsb. Liabilitiesc. Equityd. Income e. Expense 5. Delivery Equipmenta. Assetsb. Liabilitiesc. Equityd. Income e. Expense 6. Used Shop Suppliesa. Assetsb. Liabilitiesc. Equityd. Income e. Expense 7. Utilities Expensea. Assetsb. Liabilitiesc. Equityd. Income e. Expense 8. Salaries and Wagesa. Assetsb. Liabilitiesc. Equityd. Income e. Expense 9. Beverage Inventorya. Assetsb. Liabilitiesc. Equityd. Income e. Expense 10. Uncollectible Accounta. Assetsb. Liabilitiesc. Equityd. Income e. Expense 11. Landa. Assetsb. Liabilitiesc. Equityd. Income e. Expense 12. Accounts Receivablea. Assetsb. Liabilitiesc. Equityd.…arrow_forwardWhich of the following accounting records is the main source of information used to prepare thefinancial statements?A. journal entriesB. T-accountsC. trial balanceD. chart of accountsarrow_forwardThe trial balance section of the work sheet provides the information used in preparing the income statement. True or false?arrow_forward
- On the work sheet, assets are recorded in which of the following columns? a. Trial Balance, Credit b. Income Statement, Debit c. Balance Sheet, Debit d. Adjusted Trial Balance, Creditarrow_forwardOn which financial statement(s) would R. Flores, Drawing appear? a. Income statement b. Balance sheet c. Statement of owners equity d. Income statement and statement of owners equityarrow_forwardLabel each of the following accounts as asset (A), liability (L), owner’sequity (OE), revenue (R), or expense (E).a. Office Suppliesb. Professional Feesc. Prepaid Insuranced. R. Baker, Drawinge. Accounts Payablef. Service Incomeg. R. Baker, Capitalh. Rent Expensei. Accounts Receivablej. Wages Expensearrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCollege Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage Learning
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781305084087Author:Cathy J. ScottPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage