In Its First Year of Operations,Grace Company Reports the Following

question 19

Multiple Choice

In its first year of operations,Grace Company reports the following: Earned revenues of $60,000 ($52,000 cash received from customers) ; Incurred expenses of $35,000 ($31,000 cash paid toward them) ; Prepaid $8,000 cash for costs that will not be expensed until next year.Net income under the accrual basis of accounting is:

• A)$17,000.
• B)$21,000.
• C)$13,000.
• D)$25,000.
• E)None of the answer choices is correct.

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Definitions:

United States

A country in North America consisting of 50 states, a federal district, five major self-governing territories, and various possessions.

Sales Taxes

Taxes imposed by governments on sales of goods and services, typically calculated as a percentage of the sale price.

Digressive

Relating to or denoting a method that reduces in pace or intensity over time or steps, often used in taxation to describe tax rates that increase less proportionally with the amount subject to tax.

Regressive

Pertaining to a tax system where the tax rate decreases as the taxable amount increases, disproportionately affecting lower-income individuals.