Analyzing and Interpreting a Statement of Earnings LO1-1 Pest Away Corporation was organized by three individuals on January 1, 2020 to provide insect extermination services. At the end of 2020, the following statement of earnings was prepared.

Required:

1. What was the average amount of monthly revenue?

2. What was the amount of monthly rent?
3. Explain why supplies are reported as an expense.
4. Explain why interest is reported as an expense.
5. What was the average income tax rate for Pest Away Corporation?
6. What does the amount of total revenues mean to an external decision maker?
7. Can you determine how much cash the company had on December 31, 2020? Explain.

Transcribed Image Text:

PEST AWAY CORPORATION Statement of Earnings For the Year Ended December 31, 2020 Revenues Service revenue (cash) $192,000 Service revenue (credit) 24,000 Total revenues $216,000 Expenses