Based on the following information from Shep Company's records: \( \text{Sales Revenue} = \$500,000 \), \( \text{Cost of Goods Sold} = \$300,000 \), and \( \text{Operating Expenses} = \$120,000 \), what is Shep Company's net income?

• A. \$120,000
• B. \$80,000
• C. \$200,000
• D. \$180,000

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the formula for calculating net income. Net income is calculated as: \( \text{Net Income} = \text{Sales Revenue} - \text{Cost of Goods Sold} - \text{Operating Expenses} \).
2. Step 2: Identify the values provided in the problem. \( \text{Sales Revenue} = \$500,000 \), \( \text{Cost of Goods Sold} = \$300,000 \), and \( \text{Operating Expenses} = \$120,000 \).
3. Step 3: Substitute the given values into the formula. The equation becomes: \( \text{Net Income} = \$500,000 - \$300,000 - \$120,000 \).
4. Step 4: Perform the subtraction step by step. First, subtract \( \text{Cost of Goods Sold} \) from \( \text{Sales Revenue} \): \( \$500,000 - \$300,000 \). Then subtract \( \text{Operating Expenses} \) from the result.
5. Step 5: The final result after performing the calculations will give you Shep Company's net income. Compare this result to the provided answer choices to select the correct one.