Healing Hands Massage Hut offers high-end, specialized massages and grooming services, including manicures, pedicures, facials, and full-body massages. Healing Hands is a new startup service organization that generates monthly sales of $200,000. As a startup organization, Healing Hands spends $5,000 a month on advertising in local newspapers and on social media sites. In addition, each month Healing Hands spends $100,000 to pay its team of highly specialized massage therapists, and $10,000 to a technology company (to handle the company’s website, massage appointment scheduling activities, and customer communications). Further, the company incurs a $15,000 monthly expense to rent its hut space in a hip new retail market. Finally, Healing Hands incurs $20,000 of monthly administrative expenses.
Required:
1. Prepare an income statement for Healing Hands for the past month. Enter all amounts as positive numbers.
Healing Hands Massage Hut | ||
Income Statement | ||
For the Past Month | ||
$ | ||
Less operating expenses: | ||
$ | ||
$ |
2. Healing Hands’ income statement has no line item for cost of goods sold. Which of the following statement is correct.
HEALING HANDS MASSAGE HUT | ||
Income Statement | ||
For the Past Month | ||
Revenues | $200,000 | |
Less: Operating Expenses | ||
Salary Expense | $100,000 | |
Rent Expense | $15,000 | |
Technology Expenses | $10,000 | |
Advertisement Expense | $5,000 | |
Administrative Expenses | $20,000 | |
$150,000 | ||
Net Income | $50,000 | |
2. | ||
Healing Heads Massage Hut provides services in the nature of high end specialized | ||
massages and grooming services.The nature of business is provision of services and | ||
no sale of goods or merchandise is done. | ||
The income statement of service providers includes only expenses incurred in earning | ||
the service revenue.Cost of sales would only appear if the business activity includes | ||
sale of goods or merchandise. |
Healing Hands Massage Hut offers high-end, specialized massages and grooming services, including manicures, pedicures, facials, and...
Healing Hands Massage Hut offers high-end, specialized massages and grooming services, including manicures, pedicures, facials, and full-body massages. Healing Hands is a new startup service organization that generates monthly sales of $200,000. As a startup organization, Healing Hands spends $5,000 a month on advertising in local newspapers and on social media sites. In addition, each month Healing Hands spends $100,000 to pay its team of highly specialized massage therapists, and $10,000 to a technology company (to handle the company's website,...