Frank Ito began the Ito Company by investing $20,000 of cash in the business. The company recorded revenues of $185,000, expenses of $160,000, and had owner drawings of $10,000. What was Ito's net income for the year?

Question

Quizplus · Accepted Answer

Net income is calculated by subtracting total expenses, including owner drawings, from total revenue. 
Net income = Total revenue - Total expenses - Owner drawings 
Net income = $185,000 - $160,000 - $10,000 
Net income = $15,000 
Therefore, Ito's net income for the year was $15,000. The correct answer is choice C.

Frank Ito Began the Ito Company by Investing $20,000 of Cash