Nelson Company experienced the following transactions during Year 1, its first year in operation.Issued $7,000 of common stock to stockholdersProvided $3,300 of services on accountPaid $1,850 cash for operating expensesCollected $2,400 of cash from accounts receivablePaid a $150 cash dividend to stockholdersWhat is the net income that will be reported for Year 1?
A) $1,050
B) $1,450
C) $900
D) $1,300

Question

Quizplus · Accepted Answer

Net income is calculated as revenues minus expenses. Here, revenues from services are $3,300 (since whether they are on account or cash doesn't affect the revenue recognition). Operating expenses are $1,850, and dividends do not affect net income as they are distributions to shareholders and not an expense. Therefore, net income = $3,300 (revenues) - $1,850 (expenses) = $1,450.

Nelson Company Experienced the Following Transactions During Year 1, Its