Marcos Company Reported the Following Items on Its Financial Statements

question 24

Multiple Choice

Marcos Company reported the following items on its financial statements for the year ending December 31,2017:

$$\begin{array} { l r l r } \text { Sales } & \$ 560,000 & \text { Cost of goods sold } & \$ 410,000 \\\text { Salary expense } & 40,000 & \text { Interest expense } & 30,000 \\\text { Dividends } & 20,000 & \text { Income tax expense } & 25,000\end{array}$$ How much will be reported as net income on Marcos' balance sheet at December 31,2017,if this is the first year of operations?

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Definitions:

Coase Theorem

A principle that asserts if property rights are clearly defined and transaction costs are low, private negotiations will lead to the efficient resolution of disputes over the allocation of resources.

Transaction Costs

The costs that parties incur during the process of agreeing to and following through on a bargain.

Mutually Beneficial Agreement

An arrangement between parties where both or all receive benefits or advantages.

Coase Theorem

A legal and economic theory that states that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.