Sanders Company had the following data for the year ending December 31,2014:
$$\begin{array} { l l }
\text { Cash } & \$ 6,000 \
\text { Depreciation expense } & 40,000 \
\text { Prepaid rent } & 1,400 \
\text { Cost of goods sold } & 69,000 \
\text { Sales } & 200,000 \
\text { Dividends paid } & 3,000 \
\text { Rent expense } & 3,600 \
\text { Wage expense } & 81,000
\end{array}$$
What is the net income for the year ending December 31,2014?
A) $400
B) $3,400
C) $6,000
D) $6,400

Question

Sanders Company had the following data for the year ending December 31,2014:
$$\begin{array} { l l } 
\text { Cash } & \$ 6,000 \
\text { Depreciation expense } & 40,000 \
\text { Prepaid rent } & 1,400 \
\text { Cost of goods sold } & 69,000 \
\text { Sales } & 200,000 \
\text { Dividends paid } & 3,000 \
\text { Rent expense } & 3,600 \
\text { Wage expense } & 81,000
\end{array}$$
What is the net income for the year ending December 31,2014?
A) $400
B) $3,400
C) $6,000
D) $6,400

Quizplus · Accepted Answer

Net income is calculated by subtracting total expenses from total revenues. Total revenues are given as sales of $200,000. Total expenses include cost of goods sold ($69,000), depreciation expense ($40,000), rent expense ($3,600), and wage expense ($81,000). Note that prepaid rent is not an expense for this period, and dividends paid are not an expense but a distribution of earnings. Adding up the expenses: $69,000 + $40,000 + $3,600 + $81,000 = $193,600. Subtracting this from sales gives a net income of $200,000 - $193,600 = $6,400.

Sanders Company Had the Following Data for the Year Ending