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20 May, 02:37

Home Realty, Incorporated, has been operating for three years and is owned by three investors. J. Doe owns 60 percent of the total outstanding stock of 9,000 shares and is the managing executive in charge. On December 31, the following financial items for the entire year were determined: sales revenue, $236,000; salaries and wages expense, $111,000; interest expense, $7,700; advertising expenses, $9,725; and income tax expense, $19,900. Also during the year, the company declared and paid the owners dividends amounting to $17,000. Prepare the company's income statement.

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  1. 20 May, 03:38
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    Net profit = $87675

    Explanation:

    An income statement is one of the three important financial statements used for reporting a company's financial performance over a specific accounting period. The income statement focuses on the four key items - revenue, expenses, gains, and losses. It does not cover receipts (money received by the business) or the cash payments/disbursements (money paid by the business).

    It follows the general structures:

    Revenues (+)

    Operating Revenue

    Non-Operating Revenue

    Total

    Expenses (-)

    Primary Activity Expenses

    Secondary Activity Expenses

    Total

    Gains (+)

    Losses (-)

    Net income/loss

    In this exercise:

    Total revenues=$236000

    Expenses:

    salaries=$111000

    Advertising=$9725

    Interest=7700

    Total Expenses=$128425

    Taxes = $19900

    Net profit = $87675

    Note: dividends shouldn't be included in the Income Statement
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