Question

The following information was taken from the accounting records of ABC Company for the period ended January 31, 2019: Cash Retained Earnings Advertising Expense Cost of Goods Sold Rental Revenue Accounts Payable Common Stock Accumulated Depreciation $17,000 Accounts Receivable Income Tax Expense Inventory Wage Expense Sales Revenue Trademark Buildings and Land $29,000 $66,000 Cat January 1, 2019) $17,000 $36,000 $11,000 $38,000 $72,000 $45,000 $14,000 $51,000 $12,000 $93,000 $10,000 $83,000 Calculate the amount of net income earned by ABC Company in the m onth of January

Answer 1

Q1.
Net income of ABC company:
Revenue:
Sales revenue			93000
Rental Revenue			11000
Total revenue				104000
Less: Expenses
Cost of Goods sold			36000
Advertising expenses			17000
Wages expenses			12000
Total expenses				65000
net income before tax				39000
Less: tax expenses				14000
After tax net income				25000
Q2.
Net income Of Buckeye Company:
Ending balance of Retained earnings				58000
Add: Dividend declared				9000
Sub-Total				67000
Less: Beginning Balance of Retained earnings				33000
Net income Of Buckeye Company:				34000
Note: As both the balance of Retained earnings and ddividend declared during the year is given, the net income for the year is computed by making the reverse computation of Retained earnings balance.
Note: Here, the direct method of preparing the income statement could not be applied, due to 2 amounts missing i.e. cost of goods sold and depreciation expenses.
Q3.
Accounts			Nature
1. Accounts Receivable			Assets
2. Dividend Revenue			Revenue
3. Retained earnings			Equity
4. Patents			Assets
5. Cost of Goods sold			Expenses