Molly's Auto Detailers Maintains Its Records on the Cash Basis

question 27

Multiple Choice

Molly's Auto Detailers maintains its records on the cash basis. During 2018, Molly's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Molly's accrual basis net income was:

• A) $38,000.
• B) $54,000.
• C) $49,000.
• D) $42,000.

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Definitions:

Willing

Ready, inclined, or favorably disposed toward taking a particular action or supporting a particular stance.

Valid Gift

A legally recognized transfer of property or assets from one individual to another without the expectation of payment or compensation.

Real Property

Real estate comprising the ground and any structures or natural features permanently affixed, such as homes and foliage.

Properly Executed Deed

A legal document that has been completed correctly, meeting all necessary formalities to transfer ownership of property.