Lou's net income on his income statement is _______.

Lou's net income on his income statement is _______.

• A. $1,000
• B. $2,000
• C. $4,000
• D. $3,390

Answer: (D)

Net income is the profit left after subtracting all expenses from all revenues on the income statement. To find it, add up total revenues (sales, service income, and other earnings) and subtract all costs and expenses (cost of goods sold, operating expenses, interest, taxes, depreciation, etc.). The result is the net income. In Lou’s case, the problem’s numbers, when put into that revenue minus expenses framework, yield 3,390 as the final figure. For example, if revenues total 12,000 and expenses total 8,610, the difference is 3,390, which matches the net income shown. Any other revenue or expense combination that gives the same difference would also produce 3,390, while different gaps between revenues and expenses would produce a different net income.

Net income is the profit left after subtracting all expenses from all revenues on the income statement. To find it, add up total revenues (sales, service income, and other earnings) and subtract all costs and expenses (cost of goods sold, operating expenses, interest, taxes, depreciation, etc.). The result is the net income.

In Lou’s case, the problem’s numbers, when put into that revenue minus expenses framework, yield 3,390 as the final figure. For example, if revenues total 12,000 and expenses total 8,610, the difference is 3,390, which matches the net income shown. Any other revenue or expense combination that gives the same difference would also produce 3,390, while different gaps between revenues and expenses would produce a different net income.