Question

Required information [The following information applies to the questions displayed below.) Waldorf Co. had the following transactions during the month of October 2018: (1) Cash received from bank loans was $60,000. (2) Dividends of $18,500 were paid to stockholders in cash. (3) Revenues earned and received in cash amounted to $100,500. (4) Expenses incurred and paid were $78,000. What amount of net income will be reported on an income statement for the month of October?

Answer 1

Solution:

Question 1:

The answer is $ 22,500.

The net income for the month of October = Total Revenue - Total Expenses = $ 100,500 - $ 78,000 = $ 22,500.

Notes:

1) Bank Loan and Dividends paid to stockholders does not effect the net income. So, Not considered here.

2) So, Remaining options are Incorrect.

Question 2:

The Answer is $ 484,000

Owners` Equity at the end of the month = Owners` Equity at the beginning of the month + Net Income - Dividends Paid

Owners` Equity at the end of the month = $ 480,000 + $22,500 - $ 18,500 = $ 484,000.

Notes:

1) Bank Loan does not effect the Owners` Equity. So, Not considered here.

2) So, Remaining options are Incorrect.