The revenue and expense accounts of Branchly. Enterprises are shown below: Revenue Year 1 100 000 Еxpanses Year 1 65 000 Financial statements were prepared at the end of the fiscal period. The net income was $35 000. The accountant quit after preparing the statements and a new accountant began work in the new.ve.ar. At the end of the second year, the accounts appear as summarized below: Revenue Year 1 100 000 Year 2 140 000 Total 240000 Expenses Year 1 65 000 Year 2_90 000 Total 155000 Financial statements prepared at the end of the second year indicated a net income of $85 000. The owner thought this was too good to be true. The owner was right! a. Why is the $85 000 net income figure incorrect? [2] b. What is the correct net income for the second year? Show your work. [1]

The revenue and expense accounts of Branchly. Enterprises are shown below: Revenue Year 1 100 000 Еxpanses Year 1 65 000 Financial statements were prepared at the end of the fiscal period. The net income was $35 000. The accountant quit after preparing the statements and a new accountant began work in the new.ve.ar. At the end of the second year, the accounts appear as summarized below: Revenue Year 1 100 000 Year 2 140 000 Total 240000 Expenses Year 1 65 000 Year 2_90 000 Total 155000 Financial statements prepared at the end of the second year indicated a net income of $85 000. The owner thought this was too good to be true. The owner was right! a. Why is the $85 000 net income figure incorrect? [2] b. What is the correct net income for the second year? Show your work. [1]

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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