Kelly Company experienced the following events during its first accounting period.
(1) Issued common stock for $10,000 cash.
(2) Earned $8,000 of cash revenue.
(3) Paid $1,000 cash to purchase land.
(4) Paid cash dividends amounting to $500.
(5) Paid $4,400 of cash expenses.
Based on this information, what is the amount of net income?
A) $2,100
B) $2,600
C) $3,600
D) $5,600

Question

Quizplus · Accepted Answer

Net income is calculated by subtracting total expenses and dividends from total revenues. Here, the total revenue is $8,000, and the total expenses are $4,400. Dividends are not subtracted in the calculation of net income. Therefore, net income = $8,000 - $4,400 = $3,600.

Kelly Company Experienced the Following Events During Its First Accounting