Question

Question 2 9 pts IYQ Company began operations on June 1, 2019. The company entered into the following transactions during 2019: June 1: Sold common stock to owners in the amount of $449,000 and borrowed $76,000 from the bank on a three-year note payable. June 1: Purchased a parcel of land costing $150,000 by paying $43,000 in cash and agreeing to pay the remainder within 90 days. July 31: IYQ Company earned and received $11,000 of interest on its bank accounts in July. August 1: IYQ sold the land purchased on June 1 for $199,000 cash. August 18: Purchased inventory costing $83,000 on account. November 2: Sold one-half of the inventory purchased on August 18 for $126,000. The customer did not pay any cash at the time of purchase, but did agree to pay the entire balance due within sixty days. November 30: Received and paid a $38,000 bill for advertising done during the month of November. Calculate the amount of net income reported in IYQ Company's 2019 income statement.

Answer 1

Jun. 1's transaction is related to issue of common stock which will be reported on balance sheet. So, it is irrelevant to calculate net income for the period. Jun. 1's transaction is related to purchase of land by paying cash partially and by issuing note for the balance which will be reported on balance sheet. So, it is irrelevant to calculate net income for the period. Jul. 31's transaction will be reported as revenue on IYQ's income statement. Aug. 1's transaction is related to sale of land for value more than cost paid for purchasing it. So, the excess amount realized over cost of land will be reported as income. Aug. 18's transaction is related to purchase of inventory on account will be reported on the balance sheet as inventory. So, it is irrelevant to calculate net income for the period. $11,000 $49,000 ($199,000 - $150,000] $126,000 $186,000 Jul. 31: Interest income earned on bank accounts Aug. 1: Gain on sale of land Nov. 2: Sale revenue from inventory sales Total revenue to be reported on income statement Less: Nov. 2: Cost of goods sold Nov. 30: Advertising expense Net income reported in IYQ's income statement $41,500 ($83,000 x 1/2] $38,000 $106,500