Sharon Samson starts a plumbing service, Reliable Waterworks, a proprietorship. Selected transactions are described as follows:
A. Sharon deposits $7,000 into a new checking account for the company, receiving stock in exchange.
B. Reliable pays $4,000 cash for equipment to be used for plumbing repairs.
C. Reliable borrows $15,000 from a local bank and deposits the money in the checking account.
D. Reliable pays $600 rent for the first month.
E. Reliable pays $400 cash for plumbing supplies to be used on various jobs in the future.
F. Reliable completes a plumbing repair project for a local lawyer and receives $1,300 cash.
G. Sharon makes withdrawals of $2,500.
After all of the transactions, what is net income?

Question

Sharon Samson starts a plumbing service, Reliable Waterworks, a proprietorship. Selected transactions are described as follows: 
A. Sharon deposits $7,000 into a new checking account for the company, receiving stock in exchange.
B. Reliable pays $4,000 cash for equipment to be used for plumbing repairs.
C. Reliable borrows $15,000 from a local bank and deposits the money in the checking account.
D. Reliable pays $600 rent for the first month.
E. Reliable pays $400 cash for plumbing supplies to be used on various jobs in the future.
F. Reliable completes a plumbing repair project for a local lawyer and receives $1,300 cash.
G. Sharon makes withdrawals of $2,500.
After all of the transactions, what is net income?

Quizplus · Accepted Answer

Net income is calculated by subtracting expenses from revenues. Here, the revenue is $1,300 from the plumbing repair project (F). The expenses include $600 for rent (D), $400 for plumbing supplies (E), and the withdrawals by Sharon do not count as business expenses but rather as drawings. Therefore, the expenses total $1,000 ($600 + $400), leading to a net income of $300 ($1,300 - $1,000). However, there seems to be a mistake in my calculation as none of the provided options match. Given the options, it appears there was an error in the interpretation of the question or the question itself might contain inaccuracies regarding the calculation of net income.

Sharon Samson Starts a Plumbing Service, Reliable Waterworks, a Proprietorship