Question

On December 1, Karl Zant opened a speech and hearing clinic. During December, his firm had the following transactions involving revenue and expenses. Paid $2,800 for advertising. Provided services for $2,500 in cash. Paid $740 for telephone service. Paid salaries of $2,300 to employees. Provided services for $2,700 on credit. Paid $390 for office cleaning service. Did the firm earn a net income or incur a net loss for the period? What was the amount?

Answer 1

Solution: Firm would incur a net loss for the period and the amount of net loss was $1,030.

Income Statement

Revenue: Services on cash and credit	$2,500 + $2,700 = $5,200
Less: Expenses
Advertisement	($2,800)
Telephone Service	($740)
Salaries	($2,300)
Office Cleaning Service	($390)
Net Loss	($1,030)

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