Given the Data Below for a Firm in Its First

question 151

Multiple Choice

Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. $\begin{array}{lr}\text { Cash received from customers } & \$ 48,000 \\\text { Accounts receivable } & 12,000 \\\text { Cash paid for expenses } & 26,000 \\\text { Accounts payable (related to expenses) } & 3,000 \\\text { Prepaid rent for next period } & 7,000\end{array}$

• A) $22,000
• B) $31,000
• C) $24,000
• D) $15,000

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Definitions:

Fixed Costs

Regular outgoings that stay the same whether production or sales rates increase or decrease, for instance, rental costs or salary payments.

Net Income

This refers to the total profit of a company after all expenses and taxes have been deducted from total revenue.

Variable Cost

Costs that vary in proportion to the volume of goods or services produced, such as materials and labor.

Fixed Costs

Definition: Business expenses that remain the same regardless of the level of production or sales.