Question

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 Administrative expenses Operating income Rent expense Sales revenue Selling (advertising) expenses Technology Wages expense 2. Healing Hands' income statement has no line item for cost of goods sold. Which of the following statement is correct.

Answer 1

1.

Healing Hands Massage Hut Income Statement For The Past Month
Service revenue		$200,000
Less: Operating expenses:
Selling (advertising) expense	$5,000
Wages expense	100,000
Technology	10,000
Rent expense	15,000
Administrative expense	20,000	(150,000)
Operating income		$50,000

2.

Healing Hands has no cost of goods sold line item because the company is a service provider.