Arch Associates Reports the Following Comparative Balance Sheets and Income

question 126

Multiple Choice

Arch Associates reports the following comparative balance sheets and income statement information. $\begin{array}{c}\text { Arch Associates}\\ \text { Comparative Balance Sheets}\\\\\begin{array}{lr}&12 / 31 / \text { Year } 1 &12 / 31 / \text { Year } 2\\\text { Cash } & \$ 12,000&\$22,000\\\text { Accounts receivable } & 4,000&8,000 \\\text { Prepaid insurance } & 10,000&8,000 \\\text { Inventory } & 6,000 &2,000\\\text { Property, plant and equipment } & \underline{12,000}&\underline{10,000} \\\text { Total assets } & \underline{ \$ 44,000}& \underline{50,000} \\\text { Accounts payable } & \$8, 000&\$12,000 \\\text { Salaries payable } & 10,000&4,000 \\\text { Long term notes payable } & 8,000 &6,000\\\text { Stockholders' equity } & \underline{18,000}& \underline{28,000} \\\text { Total liabilities and equity } & \underline{ \$ 44,000}& \underline{\$50,000}\end{array}\end{array}$ $\begin{array}{lcr} & \begin{array}{l}\text { Income Statement } \\\text { Year Ended 12/31/Year 2 }\end{array} \\\text { Revenue } & & 70,000\\\text { Cost of goods sold } & & \underline{40,000} \\\text { Gross margin } & &30,000 \\\text { Operating expense } & & \underline{20,000 }\\\text { Net income } & & \underline{\$10,000} \\\end{array}$
The amount of cash collected from customers during Year 2 was:

• A) $66,000.
• B) $62,000.
• C) $74,000.
• D) $70,000.

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Definitions:

Surgical Procedure

A method of treatment involving incision or manipulation of the body to repair or remove tissue.

Physicians

Medical professionals who diagnose and treat illnesses, injuries, and other health conditions in patients.

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