A Corporation Started Operations on January 1, 2001; the Reporting

question 65

Essay

A corporation started operations on January 1, 2001; the reporting period ends December 31. At the end of 2001, the company's records reflected the following correct amounts after all adjusting entries: Sales revenue, $400,000; Cost of goods sold, $232,500; Other expenses (total), $70,000; Accrued wages payable, $1,500; Accounts payable, $6,000 and Accounts receivable, $4,500.
(a) Net income, accrual basis, was $_______________.
(b) Net income, cash basis $__________________.

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Definitions:

Cash Dividend

A payment made in cash to shareholders that is derived from a company's profits or reserves.

Times Interest Earned Ratio

A financial metric assessing a company’s ability to meet its interest obligations from its operating income.

Income Tax Payments

Income tax payments are the amounts of money a company or individual must pay to the government, based on the income earned over a tax period.

Interest Expense

The cost incurred by an entity for borrowed funds, reflecting the interest payments on debts.