What is Net Income for the year on Rocky’s Day Spa Income Statement?

• A. 68,000
• B. 55,000
• C. 98,435
• D. 45,625

Answer: (D)

Net income on an income statement is the bottom line: what you get when you subtract all expenses from all revenues for the period. For Rocky’s Day Spa, you would add up every source of revenue (services, product sales, etc.) and then subtract every cost incurred (salaries, rent, utilities, depreciation, supplies, marketing, insurance, etc.). The difference is the year’s profit or net income. The figure shown in the statement results in a net income of 45,625, so that is the bottom-line amount for the year. If revenues greatly exceed expenses, net income is positive; if expenses exceed revenues, it would be negative.