Final answer:
The Stannous Company's financial statements would show a D) net income of $2,000 in Year 1 based on accrual accounting, since revenue is recognized when earned regardless of the timing of cash receipts.
Step-by-step explanation:
In accrual accounting, revenue is recognized when earned, regardless of when the cash is collected. Thus, if the Stannous Company earns $2,000 of revenue on account in Year 1 and collects $1,800 in cash, the remaining $200 collected in Year 2 does not affect the revenue recognized for Year 1. Therefore, the company's financial statements would show a net income of $2,000 in Year 1. As an example using a self-check question, if a firm had sales revenue of $1 million last year and incurred explicit costs of $600,000 on labour, $150,000 on capital, and $200,000 on materials, then the firm's accounting profit would be calculated as follows: Accounting profit = total revenues minus explicit costs = $1,000,000 - ($600,000+ $150,000 + $200,000) = $50,000.