Question

Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting.

Cash received from customers $48,000
Accounts receivable $12,000
Cash paid for expenses $26,000
Accounts payable (related to expenses) $3,000
Prepaid rent for next period $7,000


a. $22,000
b. $31,000
c. $24,000
d. $15,000

Answer 1

Answer is D. Not B. Look it up.

Step-by-step explanation:

Answer 2

Answer: b. $31,000

Net income = Revenue - costs

Revenue = 48,000+12,000=60,000

Costs = 26,000+3,000= 29,000

Net Income = 60,000-29,000= 31,000

We will not count prepaid rent as an expense for this years net income calculation because it is an expense for the next accounting period and not this one.

Step-by-step explanation: