Question

On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner contributed \(84,000 in assets in exchange for its common stock to launch the business. On October 31, the company’s records show the following items and amounts. Use this information to prepare an October income statement for the business.

Cash . . . . . . . . . . . . . . . . . . . . . . . \)11,360

Cash dividends . . . . . . . . . . . . . . . . . . . . . . $ 2,000

Accounts receivable . . . . . . . . . . . 14,000

Consulting revenue . . . . . . . . . . . . . . . . . . 14,000

Office supplies . . . . . . . . . . . . . . . 3,250

Rent expense . . . . . . . . . . . . . . . . . . . . . . . 3,550

Land . . . . . . . . . . . . . . . . . . . . . . . . 46,000

Salaries expense . . . . . . . . . . . . . . . . . . . . . 7,000

Office equipment . . . . . . . . . . . . . 18,000

Telephone expense . . . . . . . . . . . . . . . . . . 760

Accounts payable . . . . . . . . . . . . . 8,500

Miscellaneous expenses . . . . . . . . . . . . . . 580

Common stock . . . . . . . . . . . . . . . 84,000

Short answer

The income statement shows income and expenses and the net income of Ernst consulting is $110.

Step-by-step solution

Definition of the income statement

The income statement is defined as the financial statement which shows the revenue earned and expenses incurred during the period.

Preparation of income statement

Ernst Consulting

Income statement

For the month ended October 31

	Amount ($)	Amount ($)
Revenues
Consulting revenue		14,000
Expenses
Rent Expense	3,550
Telephone expense	760
Miscellaneous Expense	580
Salaries Expense	7,000
Total expenses		5,590
Net Income		110