Pat's Custom Tuxedo Shop Maintains Its Records on the Cash

question 87

Multiple Choice

Pat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat's collected $42,000 in tailoring fees, and paid $14,000 in expenses. Depreciation expense totaled $2,000. Accounts receivable increased $1,500, supplies increased $4,000, and accrued liabilities increased $2,500. Pat's accrual basis net income would be:

• A)$18,000.
• B)$34,000.
• C)$23,000.
• D)$29,000.

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Definitions:

Agents

Individuals or entities authorized to act on behalf of others in transactions or negotiations.

Employees

Individuals who work for another person or organization in return for compensation.

Expressed Agency

An agency created in a written or oral agreement. Also called agency by agreement.

Principal

The main party to a transaction, such as a buyer or seller in a contract, or an individual who empowers another (agent) to act on their behalf.