Question

Ace Builders had the following transactions in June earned $4,000 "on account that will be collected in cash next month, collected $3,000from a customer that was owed from a previous month; incurred $500 of repair expense and paid cash to the repairman; paid $1,200 cash to a supplier that it owed from the previous month; paid out $800 in cash withdrawals to the owner. For Ace Builders, how much was the net income or net loss in June? O A. $6,500 net income O B. $5,300 net income OC. $3,500 net income OD. $2.500 net loss

Answer 1

Answer:

C. $3,500 net income

EXPLANATION:

Computation of net income/(loss) for the month of June

Income earned during the month	$4,000
Less: repair expense	(500)
Net income	3,500

Note:

• Earned $ 4,000 on account in the month of June, hence it will be shown in income statement for the month of June
• Repair expense incurred and paid in the month of June, hence it will be shown in income statement for the month of June
• Collected $3,000 from a customer that was owed from previous month is not the part of income of the month of June.
• Paid $1200 to a supplier owed from the previous month is not considered as expenses of June month
• Owner's withdrawal of $800 do not affect the income statement as it is not appear in income statement it appears in balance sheet.

Thank you :)