During 2020, Rumbo Corporation had cash and credit sales of $21,760 and $15,225, respectively. The company also collected accounts receivable of $9,765 and incurred operating expenses of $27,700, 80% of which were paid during the year. In addition, Rumbo prepaid $4,500 for an 18-month advertising campaign that began September 30. Rumbo’s accrual basis net income (loss) for the fiscal year ending December 31, 2020, was: a $14,075 b $9,285 c $8,535 d ($775)
During 2020, Rumbo Corporation had cash and credit sales of $21,760 and $15,225, respectively. The company also collected accounts receivable of $9,765 and incurred operating expenses of $27,700, 80% of which were paid during the year. In addition, Rumbo prepaid $4,500 for an 18-month advertising campaign that began September 30. Rumbo’s accrual basis net income (loss) for the fiscal year ending December 31, 2020, was: a $14,075 b $9,285 c $8,535 d ($775)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
During 2020, Rumbo Corporation had cash and credit sales of $21,760 and $15,225, respectively. The company also collected
a $14,075
b $9,285
c $8,535
d ($775)
Expert Solution
Formula
Net Income (Loss) = Total Sales - Operating Expenses
Note:
Since Accrual basis of accounting is followed, both income and expenses relevant to the reporting period are recognized as and when they are incurred.
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