Kelly Company Experienced the Following Events During Its First Accounting

question 93

Multiple Choice

Kelly Company experienced the following events during its first accounting period. (1) Issued common stock for $10,000 cash.
(2) Earned $8,000 of cash revenue.
(3) Paid $1,000 cash to purchase land.
(4) Paid cash dividends amounting to $500.
(5) Paid $4,400 of cash expenses.
Based on this information the amount of net income is

• A)$2,100.
• B)$2,600.
• C)$3,600.
• D)$5,600.

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Definitions:

Non-Interest-Bearing Note

A type of debt instrument that does not pay interest to the holder, instead being issued at a discount to its redemption value.

Discount Rate

The interest rate used to discount future cash flows to their present value; often reflects the risk-free interest rate.

Discount Rate

The discount rate is the interest rate set by central banks charged to commercial banks for loans, affecting the cost of borrowing money.

Actual Interest Rate

The real rate of interest earned or paid on an investment or loan, taking into account the effect of compounding.