The Whackem-Smackem Software Company Sold $11 Million of Computer Games

question 26

Multiple Choice

The Whackem-Smackem Software Company sold $11 million of computer games in its first year of operations.The company received payments of $7.5 million for these computer games.The company's income statement would report:

• A)sales revenue of $7.5 million.
• B)accounts receivable of $3.5 million.
• C)expenses of $3.5 million.
• D)sales revenue of $11 million.

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Definitions:

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, representing the wear and tear, deterioration, or obsolescence of the asset.

Useful Life

The estimated period over which an asset is expected to be used before it is considered to be no longer useful for business operations.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, reflecting how much of the asset's value has been used up.

Deferred Revenues

Income received by a company for goods to be delivered or services to be provided in the future, recorded as a liability until earned.