The Following Pre-Closing Accounts and Balances Were Drawn from the Records

question 21

Multiple Choice

The following pre-closing accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: $$\begin{array} { l lll} \text { Cash } & \$ 4,000& \text { Accounts receivable } & \$3,400\\\text { Dividends} &2,000& \text { common stock } & 3,900 \\\text { Land } & 3,200 &\text { Revenue } &3,200 \\\text { Accounts payable } & 1,800 &\text { Expense } & 2,200\end{array}$$

What is net income that will be shown on Carolina's Year 1 income statement?

• A) $2,200
• B) $3,200
• C) $1,000
• D) $200

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Definitions:

Maximum Profit

The highest possible financial gain a business can achieve from its operations, after all costs and expenses have been deducted.

Efficient Scale

The level of production at which a company can produce its goods or services at the lowest average cost per unit, achieving economies of scale.

Efficient Scale

The level of production that minimizes the average total cost of producing a good or service.

Positive Profit

Earnings that exceed the total costs and expenses associated with producing or providing a service or product.