Question

At the end of its first month of operations, JMP Consulting reported Revenue of $37,000. It also reported Wages Expense, $6,000; Rent Expense, $5,000; and Utilities Expense, $1,000. Calculate net income reported on the income statement at month-end.

Answer 1

Net income = Sales revenue($37,000) - Salaries and wages expense ($6,000) - Rent expense($5,000) - Utility Expense($1,000) = $25,000

Net income in the company is the amount that remains after all costs, such as salaries and wages, the cost of goods or raw materials, and taxes, have been paid. Net income is the amount that a person keeps after paying taxes, health insurance premiums, and retirement contributions.

Typically, net income is calculated annually for each fiscal year. Tax expense, financing expense (interest expense), and minority interest are frequently excluded items. Preferred stock dividends will also be deducted even though they are not considered an expense. Cost of products sold, sales discounts, and sales returns and allowances could all be omitted costs for a retailer.

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