Question

Mars Corp. earned $10,000 in January, but Mars only received $7,000 of that and the other $3,000 will be received in February. Mars only expense was $2,500 for wages. Of this amount, Mars paid $1,000 during January and will pay the remaining $1,500 on February 1st. What is Mars net income for January?

A $7,500
B $6,000
C $9,000
D $4,500

Answer 1

Mars net income for January is A. $7,500

Step-by-step explanation:

Following the Accrual accounting - an accounting method that revenue or expenses are recorded when a transaction occurs rather than when payment is received or made, in January:

Revenue of Mars Corp. was $10,000 and expense was $2,500. It does not depend on when the company received or made the payment.

Net income = Revenue - expense = $10,000 - $2,500 = $7,500