A company's income statement showed the following: Revenues of \$120,000, Cost of Goods Sold of \$70,000, Operating Expenses of \$30,000, and Income Tax Expense of \$5,000. What is the company's net income?

• A. \$20,000
• B. \$15,000
• C. \$25,000
• D. \$50,000

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the formula for calculating net income. Net income is calculated as Revenues minus all expenses, which include Cost of Goods Sold, Operating Expenses, and Income Tax Expense.
2. Step 2: Start by identifying the given values from the problem: Revenues = \$120,000, Cost of Goods Sold = \$70,000, Operating Expenses = \$30,000, and Income Tax Expense = \$5,000.
3. Step 3: Apply the formula for net income: Net Income = Revenues - (Cost of Goods Sold + Operating Expenses + Income Tax Expense).
4. Step 4: Substitute the given values into the formula: Net Income = \$120,000 - (\$70,000 + \$30,000 + \$5,000).
5. Step 5: Perform the arithmetic operations step by step: First, add the expenses together (\$70,000 + \$30,000 + \$5,000), then subtract the total expenses from the revenues (\$120,000 - Total Expenses).