Preparation of Income statement from the given transactions.
The following events occurred at Handsome Hounds Grooming Company during its first year of business:
a)To establish the company, the two owners contributed a total of $50,000 in exchange for common stock.
b)Grooming service revenue for the first year amounted to $150,000 of which $40,000 was on account.
c)Customers owe $10,000 at the end of the year from the services provided on the account.
d)At the beginning of the year, a storage building was rented. The company was required to sign a three-year lease for $12,000 per year and make a $2,000 refundable security deposit. The first year\'s lease payment and the security deposit were paid at the beginning of the year.
e)At the beginning of the year, the company purchased a patent at a cost of $100,000 for a revolutionary system to be used for dog grooming. The patent is expected to be useful for 10 years. The company paid 20% down in cash and signed a four-year note at the bank for the remainder.
f)Operating expenses, including amortization of the patent and rent on the storage building, totaled $80,000 for the first year. No expenses were accrued or unpaid at the end of the year.
g)The company declared and paid a $20,000 cash dividend at the end of the first year.
Question:
Prepare an income statement for the first year