Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 58

Prepare Statements for a Service Company

Lead! Inc. offers executive coaching services to small business owners. Lead!’s operating profits average 20 percent of revenues and its marketing and administrative costs average 25 percent of the cost of services sold.

Required

Lead! Inc. expects revenues to be $400,000 for April. Prepare an income statement for April for Lead! Inc. assuming its expectations are met.

Step 1 of 5

Income statement is prepared to show the results of business transactions over a period, usually for a month or a year.

Under this statement, the total expenses are deducted from the total revenues.

When the total revenue is more than the total expenses over the period, the result is the net income; otherwise, it is net loss.