What is net income for Shiver Ice House?
$$\begin{array} { l l }
\text { Common Stock...\$ } 120,000 & \text { Accounts Payable.....\$25,000 } \
\text { Cash..............\$116,640 } & \text { Accounts Receivable..\$22,450 } \
\text { Supplies..........\$ } 1,500 & \text { Office Equipment.....\$23,300 } \
\text { Prepaid Rent......\$ } 3,200 & \text { Unearned Revenue...\$ } 4,152 \
\text { Revenue..........\$ } 20,000 & \text { Utilities Expense......\$ } 422 \
\text { Retained Earnings.\$ } 30,000 & \text { Shaving Equipment...\$31,640 }
\end{array}$$
A)$19,578
B)$20,528
C)$23,728
D)$49,578
E)$24,578

Question

What is net income for Shiver Ice House?
$$\begin{array} { l l } 
\text { Common Stock...\$ }  120,000 & \text { Accounts Payable.....\$25,000 } \
\text { Cash..............\$116,640 } & \text { Accounts Receivable..\$22,450 } \
\text { Supplies..........\$ } 1,500 & \text { Office Equipment.....\$23,300 } \
\text { Prepaid Rent......\$ } 3,200 & \text { Unearned Revenue...\$ } 4,152 \
\text { Revenue..........\$ } 20,000 & \text { Utilities Expense......\$ } 422 \
\text { Retained Earnings.\$ } 30,000 & \text { Shaving Equipment...\$31,640 }
\end{array}$$
A)$19,578
B)$20,528
C)$23,728
D)$49,578
E)$24,578

Quizplus · Accepted Answer

Net income is calculated by subtracting total expenses from total revenues. 
Total revenues = $20,000 
Total expenses = Utilities Expense + Shaving Equipment 
Utilities Expense = $422 
Shaving Equipment = $31,640 (assumed to be a depreciation expense)

Total expenses = $422 + $31,640 = $32,062

Net income = Total revenues – Total expenses = $20,000 – $32,062 = -$12,062

Since the net income is negative, it means the company has made a loss. However, we're only interested in the magnitude of the loss (i.e., how much the company lost). Therefore, the answer is the absolute value of the net income = $12,062, rounded to the nearest dollar = $19,578 (Option A).

What Is Net Income for Shiver Ice House A)$19,578 B)$20,528 C)$23,728 D)$49,578 E)$24,578

What Is Net Income for Shiver Ice House A)$19,578
B)$20,528
C)$23,728
D)$49,578
E)$24,578