Question

Smokey Enterprises began operations by receiving $100,000 cash from its sole owner Jessica Jones. During its first year of operations, the business earned $20,000 in cash from operations and paid $15,000 in cash expenses during the year. During its first year of operations, Smokey Enterprises would report net income of_____________________

Answer 1

Answer:

$5,000

Explanation:

Net income of an entity is the difference between the sales made by the entity and the expenses incurred in the process of making these sales.

As such for Smokey Enterprises whose business earned $20,000 in cash from operations and paid $15,000 in cash expenses during the year,

Reported net income = $20,000 - $15,000

= $5,000