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

question 34

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 cash basis of accounting is:

• A) $21,000.
• B) $13,000.
• C) $25,000.
• D) $17,000.
• E) None of the above.

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Definitions:

Misrepresentation

A false statement of fact made by one party to another, which may render a contract voidable.

Easement

A non-possessory right to use and/or enter onto the real property of another without owning it, often for a specific purpose like utilities or access.

Non Est Factum

A legal defense claiming a contract is invalid due to a serious misunderstanding or mistake about its nature or terms.

Negotiable Instruments

Financial documents that guarantee the payment of a specific amount of money, either on demand or at a set time, with the payee able to transfer it to another holder.