The Longmeadow Painting Company begins operations on July 1, 2015. During July, the company records the following activities: The company earns $12,000 from painting houses, all paid in cash.
The company uses $2,000 in paint and $400 in supplies.
The company pays employees $8,000 cash for labor provided during the month.
The company purchases paint at a total cost of $2,500, paying cash.
The company has other expenses, including insurance and business fees, of $200.
Fill in the following income statement for Longmeadow Painting incorporating the above activities. Do NOT enter S signs, just numbers.
Hint: Are supplies used part of Cost of Goods Sold?
Review course note 1B if you are not surel
Longmeadow Painting Co.
Income Statement
For the month ended July 31, 2015
Revenue
Expenses
Cost of goods sold
Gross Profit
Wage expense
Supplies expense
Other expense
Net Income

Longmeadow Painting Co.

Income Statement

For the month ended July 31, 2015

Revenue                       12,000

Expenses

Cost of goods sold       2,000

Gross Profit                  10,000

Wage expense             8,000

Supplies expense           400

Other expense               200

Net Income                   1,400

Explanation:

a) Supplies used are not part of Cost of Goods Sold.  They are regarded as expenses and not directly related to the painting done for customers, but are materials used in the running and administration of the business.

b) There is an Ending Inventory of paint worth $500 ($2,500 - $2,000), which is the difference between the purchases of paint and the paint used during the month.  This will form part of the Balance Sheet assets because the Cost of Goods Sold only considered the paint used and not the purchases.

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