Question

The following transactions are July activities of Craig's Bowling, Inc

a. Craig's collected $13,300 from customers for games played in July.
b. Craig's sold bowling merchandise inventory from its pro shop for $8,000, received $3,600 in cash and customers owed the rest on account. (The cost of goods sold (expected related to these sales is $3,490)
c. Craig's received $2,500 from customers who purchased merchandise in June on the account.
d. The men's and ladies bowling leagues gave Craig's a deposit of $1,900 for the upcoming fall season.
e. Craig's paid $1,800 on the electricity bill for June (recorded as an expense in June).
f. Craig's paid $4,500 to employees for work in July g Craig's purchased $1.800 in insurance coverage from July 1 to October 1. (Part is an expense for July and part is a prepaid expense to be used in future months )
h. Craig's paid $1,800 to plumbers for repairing a broken pipe in the restrooms.
i. Craig's received the July electricity bill for $2,000 to be paid in August

Prepare an income statement for Craig's Bowling, Inc., for the month of July

Answer 1

Answer:

                                 Craig's Bowling, Inc

               Income Statement for the month of July

Sales ($13,300 + $8,000)                                       $21,300

Less: Cost of goods sold                                        ($3,490)

Gross profit                                                              $17,810

Less: Expenses

Insurance ($1,800 / 3)                        $600

Wages                                                 $4,500            

Repair expenses                                $1,800

Electricity bill                                      $2,000

Total expenses                                                        ($8,900)

Net profit                                                                  $8,910

Note:

Note that the purpose of the income statement is to calculate the profit or loss for a specific period, and not the cash flows during that period. Hence, transactions c., d. and e. are not to be recorded in the income statement for the month of July.