Question

save MC Qu. 158 Smiles Entertainment had the following... Smiles Entertainment had the following accounts and balances at December 31: Account Cash Accounts Receivable Prepaid Insurance Supplies Accounts Payable Common Stock Retained Earnings Service Revenue Salaries Expense Utilities Expense Totals Debit Credit $11,800 2,360 3,120 1,360 $ 5,900 4,900 1,080 8,800 680 1,360 $20,680 $20,680 Using the information in the table, calculate the company's reported net income for the period. Multiple Choice O $5,220 Prev 17 of 19 !!! Next OP2U * ©CO OROM

Answer 1

In the Books of

Smiles Entertainment:

Trial Balance On 31 December, 20XX
Accounts	Dr	Cr
Cash	$        11,800
Accounts Receivable	$          2,360
Prepaid Insurances	$          3,120
Salaries Expense	$              680
Utilities Expense	$          1,360
Supplies	$          1,360
Accounts Payable		$    5,900
Common Stock		$    4,900
Retained Earnings		$    1,080
Service Revenue		$    8,800
	$        20,680	$ 20,680

In order to determine Net Income of the period we need to prepare Income Statement using Account available in above mentioned Trial Balance. Accounts in the nature of revenue income or expenses would be debited and credited respectively to Profit and Loss Accounts (Income Statement). The net amount (profit/loss) would be transferred to Balance Sheet from Profit and Loss Account (Income Statement). Remaining accounts would directly go to Statement of Financial Position (Balance Sheet) of the organization.

Income Statement for the period ended 31 December, 20XX
		Amounts
Incomes:
Service Revenue		$    8,800
Less: Expenses
Salaries Expense	$        680
Utilities Expense	$    1,360
Supplies	$    1,360	$    3,400
Net Income		$    5,400

Balance Sheet as on 31 December, 20XX
Common Stock	$    4,900
Retained Earnings	$    1,080
Net Income	$    5,400
Accounts Payable	$    5,900
	$ 17,280
Accounts Receivable	$    2,360
Prepaid Insurances	$    3,120
Cash	$ 11,800
	$ 17,280