Question

Berkshire Inc. had revenues of $379,000 in its first year of operations. The company has not collected on $45,900 of its sales and still owes $38,500 on $160,000 of merchandise it purchased. There was no inventory on hand at the end of the year. The company paid $33,200 in salaries. The owners invested $46,000 in the business and $21,000 was borrowed on a five-year note. The company paid $1,890 in interest that was the amount owed for the year and paid $8,500 for a two-year insurance policy on the first day of business. Ignore the income tax effect, the net income for the first year for Berkshire is: Multiple Choice $219,000 $262,590 $179,660 $185,800

Answer 1

Answer:

$235,010

Explanation:

The computation of the net income for the year is shown below:

Receipt:  

Cash from customer ($379,000 - $45,900) $333,100

Investment in business  $46,000

Borrowed money on notes $21,000

Total Receipts (A) $400,100

Disbursement:  

Payment to vendor ($160,000 - $38,500) $121,500

Salary paid in cash       $33,200

Interest paid in cash   $1,890

Insurance policy purchased for cash $8,500

Total Disbursement (B) $165,090

Cash balance at the end (A - B) $235,010

The same is to be considered as a net income

All options that are given in the question is wrong