Question

A check for $120 arrives at Mad magazine on June 1st, 1988 for payment of a year’s subscription of magazines. Starting in July, 1988, the magazines are delivered monthly for the next twelve months. As a result of this activity: X: Net income increases in 1988 by $120 Y: earnings increase by $70 in 1988 and $50 in 1989 A. X B. Y C. Both D neither

Answer 1

X: Net income increases in 1988 by $120. Y: Earnings increase by $70 in 1988 and $50 in 1989. Therefore, the answer is C. Both.

Both X and Y are true statements.

X: Net income increases in 1988 by $120

When the check for the year's subscription arrives at Mad magazine on June 1st, 1988, it is recorded as an increase in net income. This is because the check represents revenue earned by the magazine. As a result, the net income in 1988 increases by $120.

Y: Earnings increase by $70 in 1988 and $50 in 1989

Since the magazines are delivered monthly starting in July 1988, the revenue from the subscription is spread out over the next twelve months. In 1988, the magazine earns $70 from the subscription (May-August), and in 1989, it earns an additional $50 (January-June). Therefore, the total earnings increase by $70 in 1988 and $50 in 1989.

Therefore, both X and Y are true, so the answer is C. Both.