Question

Bravo Company began operations at the beginning of 20X6 with a $10,000 cash investment by stockholders. During 20X6, Bravo Company had revenue on account of $5,000; of this amount $2,000 was collected during 20X6 and $3,000 was an outstanding receivable at year-end. Bravo Company incurred $3,000 of operating expenses during 20X6; of this amount $1,000 was unpaid at year-end. During 20X6, $1,000 cash was disbursed as dividends. The only other transaction during 20X6 was the purchase of $5,000 of equipment for cash near the end of the year. How much was Bravo Company's 20X6 net income?

Answer 1

$2,000

Step-by-step explanation:

Net income is determined by revenue subtracted by operating expenses. Since Bravo Company had revenue on account of $5,000 and incurred $3,000 of operating expenses during 20X6, the company's net income for the year is:

`N = \$5,000 - \$3,000\\N=\$2,000`

Bravo Company's 20X6 net income was $2,000.