Income Statement
1. Rescue Records needs rescuing. The downloading of songs and other media are killing its business. The owners of Rescue want to know if they made a net income or a net loss for the year ended December 31. Given the following account balances, prepare an income statement for Rescue “Income Statement”.
Advertising Expense $4,600
Salary Expense $25,470
Cost of Goods Sold $109,000
Sales Revenue $197,000
Income Tax Expense $3,800
Loss on Sale of Stock $12,090
Rent Expense $35,000
2. Your lawn care business, A Cut Above, has grown beyond your wildest dreams—to the point where you would like to buy some new equipment and hire some people to help you. Unfortunately, you don’t have that kind of money sitting around, so you are applying for a loan. The bank has requested financial statements, including, of course, a balance sheet. The following are the balances you have on 5/31. Prepare a classified balance sheet to submit to the bank.
Cash $2,400
Prepaid Insurance $1,400
Note Payable Due Two Years from Now (Loan from Mom) $5,000
Capital Stock (Money You Invested to Start Business) $2,000
Accounts Receivable $500
Supplies Inventory $300
Equipment, Net $3,000
Accounts Payable $300
Retained Earnings $300
