X Company is a merchandiser and prepares monthly financial statements. The follo
ID: 2598312 • Letter: X
Question
X Company is a merchandiser and prepares monthly financial statements. The following is its balance sheet at the beginning of January:
The following summary transactions occurred during January:
Sold stock to investors for $47,000.
Borrowed $28,000 from a bank.
Bought merchandise from suppliers, paying $3,430 and promising to pay $5,148 next month.
Bought equipment from a manufacturer, paying $31,400 and promising to pay $4,900 in three months.
Paid $4,113 to merchandise suppliers that it had promised to pay.
Sold merchandise, receiving $16,736 cash and promises to pay of $4,794; the merchandise that was sold previously cost $10,765.
Paid a total of $554 for rent and insurance in advance.
Received $3,322 from customers who had promised to pay.
Paid $5,750 for wages, utilties, and other miscellaneous expenses.
What was net income in January?
Balance Sheet January 1Explanation / Answer
Computation of net income: Sale of merchandise (16736+4794) 21530 Less:Cost of merchandise sold 10765 Gross profit 10765 Less:Operating expenses Wages,utilities & miscellaneous expense 5750 Net income 5015 Other transactions has no effect on net income
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