The following items are taken from the financial statements of the Freight Service for the year ending December 31, 2016:

Accounts payable $ 19,000

Accounts receivable 13,000

Accumulated depreciation - equipment 26,000

Advertising expense 21,200

Cash 15,000

Owner's capital (1/1/16) 104,000

Owner's drawings 11,000

Depreciation expense 12,000

Insurance expense 3,800

Note payable, due 6/30/17 72,000

Prepaid insurance (12-month policy) 7,200

Rent expense 16,000

Salaries and wages expense 32,000

Service revenue 135,000

Supplies 5,000

Supplies expense 6,000

Equipment 210,000

What is the company's net income for the year ending December 31, 2016?

Freight Service

Income Statement for the year ending December 31, 2016:

Service Service $135,000

Costs:

Advertising expense 21,200

Depreciation expense 12,000

Insurance expense 3,800

Rent expense 16,000

Salaries & Wages exp 32,000

Supplies expense 6,000

Total Expenses $91,000

Net Income $44,000

Explanation:

In calculating the net income for the year, only revenue and expenses (income statement) items are taken into account. They are also called temporary or period accounts which are closed to the income statement for the period, because they are not permanent accounts. Permanent accounts are taken to the balance sheet and carried over to the next accounting period.