In Its First Year of Business,Declan Industries Earned $175,000 of Revenues

question 127

Multiple Choice

In its first year of business,Declan Industries earned $175,000 of revenues of which $140,000 was collected.It also incurred $157,500 in expenses for which $140,000 was paid.Which of the following statements are correct?

• A)Declan should use cash basis accounting for external reporting purposes as required under GAAP and IFRS.
• B)Declan should report net income of $17,500 for external reporting purposes.
• C)Declan should report $0 net income for external reporting purposes.
• D)Declan should report net income of $35,000 for external reporting purposes.

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Definitions:

Pension

A retirement plan that requires an employer to make contributions into a pool of funds set aside for an employee's future benefit.

Profit-sharing Plan

A retirement plan that gives employees a share in the profits of the company. Each employee receives a percentage of those profits based on the company's earnings.

Defined-benefit Plans

Retirement plans that promise a specific pension payment upon retirement, based on salary and years of service.

Definitely Determinable Benefits

Benefits from a pension plan or retirement account that are calculable and guaranteed based on factors like salary history and years of service.