Question

As of December 31, 2017, Armani Company’s financial records show the following items and amounts.

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000

Retained earnings, Dec. 31, 2016 . . . . . . . . . . . . . . . . 4,000

Retained earnings, Dec. 31, 2017 . . . . . . . . . . . . . . . . 6,000

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000

Consulting revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000

Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000

Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

Selling and administrative expenses . . . . . . . . . . . . . . 8,000

Required Prepare the 2017 year-end income statement for Armani Company

Short answer

Retained earnings are the accumulated profit and net income which is $15,000

Step-by-step solution

Definition of retained earnings

Retained earnings are defined as the accumulated profit of the business over a period of time which is left after the dividends.

Preparation of Income statement

Armani Company

Income Statement

As of December 31, 2017

	Amount ($)	Amount ($)
Revenue
Consulting Revenue	33,000
Rental Revenue	22,000
Total Revenue		55,000
Expenses
Salaries Expense	20,000
Rent Expense	12,000
Selling and administrative expenses	8,000
Total Expenses		40,000

Net Income

15,000