Net Income for the Year Is $25,000

question 36

Multiple Choice

Net income for the year is $25,000.Withdrawals of $36,000 per were taken at the end of the year.Which of the following occurs?

• A) The Capital account decreases by $22,000.
• B) The Capital account decreases by $11,000.
• C) The Capital account increases by $11,000.
• D) The Capital account increases by $22,000.

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Definitions:

Consequential Damages

Compensation for losses that directly and foreseeably result from the breach of a contract or other wrongful act.

Lost Profits

Damages claimed in a lawsuit representing the profits one would have made but for another party's wrongful act.

Speculative

Involving a high risk of loss but also offering the potential for substantial gains, often based on future expectations rather than current realities.

Insolvent

Being insolvent means lacking the financial ability to pay debts when they are due, which can lead to bankruptcy or other legal financial proceedings.