Question

During the first year of operations, a company sold $115,000 of goods to customers and received $97,500 in cash from customers. The remainder is owed to the company at the end of the year. The company incurred $71,500 in expenses for the year and paid $66,500 in cash for these expenses. The remainder is owed by the company at the end of the year. Based on this information, what is the amount of net income for the year?$43,500$31,000$48,500$26,000

Answer 1

Answer:

$43,500

Explanation:

Net income = sales - expenses

sales = 115,000

expenses (cost) = 71,500

net income = 115,000 - 71,500 = 43,500

We calculate based on the matching principle.

The revenues and expenses should be recognized during the period they occur.

In this case, the sales are for 115,000 regardless of the amount collected during the period or subsequent periods

The expenses for the period are 71,500 Even if a portion remains unpaid at the end of the year, all the expenses for the year should be included in the calculation.