Saved Rushmore Company provided services for $25,500 cash during the 2016 accoun

Question

Saved Rushmore Company provided services for $25,500 cash during the 2016 accounting period. Rushmore incurred $19,000 expenses on account during 2016, and by the end of the year, $6,500 of that amount had been paid with cash. Assuming that these ake the only accounting events that affected Rushmore during 2016, Multiple Choice The amount of net loss shown on the income statement is $6,500. The amount of net income shown on the income statement is $12,500. The amount of net income shown on the income statement is $6,500.

Explanation / Answer

The amount of income to be shown in the financial statements ia shown irrespective of how much amount has been paid out of it.

In this case rushmore company paid $6500 only from expense of $19500 but that will not affect the profitability of the company.

So profit of the company will be:- Revenue - Expense

= $25500 - $19000

= $6500 profit

Answer is Option C. Net income is $6500.

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