Alex Is a Calendar-Year Sole Proprietor

question 4

Multiple Choice

Alex is a calendar-year sole proprietor.He began business on December 1,this year.He uses the accrual method of accounting.Alex had the following collections in December: • Collected $7,000 in December,from clients who paid cash for services to be performed next year.
• Collected $5,000 in December,for services performed during December; deposited in an operating account on December 31,this year.
• Collected $12,000 in December; on accounts receivable for services performed in December; deposited in operating account on January 2,next year.
What is the amount Alex must include in his income for December?

• A)$7,000
• B)$12,000
• C)$17,000
• D)$24,000

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Definitions:

Abnormal Return

A term in finance that refers to the difference between an actual investment return and the expected return, based on the asset's risk and market movements.

Fourth Quarter Earnings

The financial performance of a company in the final quarter of its fiscal year, often used as an indicator of annual performance.

Beta

A financial metric that measures the volatility of a stock or portfolio in comparison to the market as a whole.

Annualized Return

The geometric average amount of money earned by an investment each year over a given time period, often used to compare the performance of investments with different time horizons.