Ferguson's Computer Repairs, Inc. opened on February 1 of the current year. During February, the following transactions occurred and were recorded in the company's books: 1. The owner invested $20,000 cash in the business.
2) The contributed $50,000 of equipment to the corporation.
3) The company paid $1,000 cash to rent office space for the month.
4) The company provided $6,000 of services for cash during February.
5) The company paid $2,200 for salaries for the month.
6) The company provided $3,000 of services to customers on account.
7) The company paid cash of $800 for monthly utilities.
8) The company paid a cash dividend of $500 to the owner.
Based on this information, net income for February would be:
A)$5,000.
B)$4,200.
C)$25,000.
D)$24,200.
E)$9,000.

Question

Quizplus · Accepted Answer

Net income is calculated as revenues minus expenses. Revenues for February are $6,000 (cash services) + $3,000 (services on account) = $9,000. Expenses for February are $1,000 (rent) + $2,200 (salaries) + $800 (utilities) = $4,000. Therefore, net income for February is $9,000 - $4,000 = $5,000.