In Its First Year of Operations, Grace Company Reports the Following

Multiple Choice

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 of accounting is:

A) $21,000.
B) $13,000.
C) $25,000.
D) $17,000.
E) None of the above.