In Its First Year Of Operations, Grace Company Reports The Following: Earned Revenues Of $60,000 ($52,000 Cash Received From Customers); Incurred Expenses Of $35,000 ($31,000 Cash Paid Toward Them); Prepaid $8,000 Cash For Costs That Will Not Be Expensed Until Next Year. Net Income Under The Cash Basis And Accrual Basis Of Accounting Is:
Here, we are required to calculate Net Income (NI) of the business of Grace company for the current accounting period Under Cash Basis Of Accounting And Accrual Basis Of Accounting . (i). Net Income Under Cash Basis Of Accounting (CBA) Given: Total Revenues = $52,000 Total Expenses = $31,000 As we know that formula used for the calculation of Net Income is: Net Income - Total Revenues - Total Expenses By Putting the Values, we have: Net Income = $52,000 - $31,000 = $21,000 So, the correct answer under cash basis of accounting is $21,000, i.e., the correct option of this multiple choice question is B.