Multiple Choice
Which of the following best describes what the income statement shows?
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1. Introduction to Accounting
The Financial Statements
Multiple Choice
Tisdale Incorporated reports the following amounts in its December 31, 2024, income statement: Revenues of \$500,000, Cost of Goods Sold of \$300,000, and Operating Expenses of \$120,000. What is Tisdale's net income for the year ended December 31, 2024?
A
\$120,000
B
\$200,000
C
\$80,000
D
\$380,000
Verified step by step guidance1
Step 1: Understand the formula for calculating net income. Net income is determined using the formula: Net Income = Revenues - Expenses. Expenses typically include Cost of Goods Sold (COGS) and Operating Expenses.
Step 2: Identify the values provided in the problem. Revenues are \$500,000, Cost of Goods Sold is \$300,000, and Operating Expenses are \$120,000.
Step 3: Add up all the expenses. Combine the Cost of Goods Sold and Operating Expenses to find the total expenses: Total Expenses = COGS + Operating Expenses.
Step 4: Subtract the total expenses from the revenues to calculate net income. Use the formula: Net Income = Revenues - Total Expenses.
Step 5: Verify the calculation conceptually. Ensure that the subtraction aligns with the definition of net income, which represents the profit remaining after all expenses are deducted from revenues.
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