During 2018, the First Year of Operations, Silver, Inc

question 21

Multiple Choice

During 2018, the first year of operations, Silver, Inc., pays salaries of $175,000.At the end of the year, employees have earned salaries of $20,000, which are not paid by Silver until early in 2019.What is the amount of the deduction for salary expense?

• A)If Silver uses the cash method, $175,000 in 2018 and $0 in 2019.
• B)If Silver uses the cash method, $0 in 2018 and $195,000 in 2019.
• C)If Silver uses the accrual method, $175,000 in 2018 and $20,000 in 2019.
• D)If Silver uses the accrual method, $195,000 in 2018 and $0 in 2019.
• E)None of these is correct.

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Definitions:

Real Assets

Tangible, physical assets such as real estate, commodities, and natural resources, which have intrinsic value due to their substance and physical properties.

Common Stock

Represents ownership shares in a corporation, giving holders a claim on part of the company's profits and assets.

Flow of Funds Accounts

Financial accounts that track the flow of money among various sectors within an economy, helping to analyze financial markets and monetary movements.

Liabilities

Financial obligations or debts that a company or individual owes, which are recorded on the right side of the balance sheet.