Question

Nez Company provided services for $7,500 cash during the 2012 accounting period. Nez incurred $6,000 expenses on account during 2012, and by the end of the year, $3,000 of that amount had been paid with cash. Nez paid dividends of $900 to stockholders during the year. Assume that these are the only accounting events that affected Nez during the 2012 accounting period.

10. What was the amount of Nez's net income for 2012?
A. $1,500
B. $600
C. $4,500
D. $3,600

Answer 1

Answer:

A. $1,500

Explanation:

According to given data

Service revenue = $7,500

Expense = $6,000

Net Income = Service Revenue - Expenses

Net Income = $7,500 - $6,000

Net Income = $1,500

Net Income is calculated on the basis of accrual concept, so,cash received and paid during 2012 are not dealt in the calculations of Net Income. So, correct answer is A. $1,500.