Question

(The following information applies to the questions displayed below.) The December 31, Year 1, adjusted trial balance for a company is presented below. Credit Debit $ 11,100 141,000 5,100 25,500 310,000 Accounts Cash Accounts Receivable Prepaid Rent Supplies Equipment Accumulated Depreciation Accounts Payable Salaries Payable Interest Payable Notes Payable (due in two years) Common Stock Retained Earnings Service Revenue Salaries Expense Rent Expense Depreciation Expense Interest Expense Totals $126,000 11, 100 10,100 4,100 31,000 210,000 51,000 410,000 310,000 15,500 31,000 4,100 $853,300 $853,300 aces Required: 1. Prepare an income statement for the year ended December 31, Year 1. Income Statement For the Year Ended December 31, Year 1 Service Revenue Expenses:

Answer 1

	Income statement
	For the year ended Dec. 31, Year 1
	Service Revenue		$410,000
	Total revenue		$410,000
	Expense:
	Salaries expense	$310,000
	Rent expense	$15,500
	Depreciation expense	$31,000
	Interest expense	$4,100	$360,600
	Net income		$49,400
	*Other items are balance sheet items, hence not included in Income statement.
	Common doubts:
	Prepaid Expense - It is an asset not expense
	Supplies : It is an asset hence not expensed
	Accumulated depreciation : It is a kind of liability.
	Salary payable and rent payable are liabilities not expense