Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1)issued stock for $80,0002)borrowed $65,000 from its bank3)provided consulting services for $78,0004)paid back $35,000 of the bank loan5)paid rent expense for $19,0006)purchased equipment costing $32,0007)paid $5,000 dividends to stockholders8)paid employees' salaries for work completed during the year, $41,000What is Yowell's net income?
A)$40,000
B)$18,000
C)$14,000
D)$59,000

Question

Quizplus · Accepted Answer

To calculate the net income, we need to subtract all expenses (such as rent expense, salaries, equipment cost, dividends) from the consulting revenue.

Revenue: $78,000

Expenses: 
Rent expense: $19,000 
Salaries: $41,000 
Equipment cost: $32,000 
Dividends: $5,000

Total Expenses: $97,000

Net Income: Revenue - Expenses 
Net Income: $78,000 - $97,000 
Net Income: -$19,000

Since the net income is negative, it means that the company incurred a loss of $19,000 in Year 1. Therefore, the best choice is B.

Yowell Company Began Operations on January 1, Year 1