Asked by Debbie Annang on May 11, 2024
Verified
Bob Jones is a sole proprietor who began his business in 2019 with $20,000 cash.During the year 2019,he earned revenues of $180,000,incurred expenses of $75,000,and withdrew $120,000.Which of the following is true for the sole proprietorship?
A) The net income is $120,000.
B) The drawing account will be closed with a credit of $100,000.
C) The owner's equity at the end of 2019 is $125,000.
D) The capital account balance at the end of year 2019 is $5,000.
Sole Proprietorship
A business structure owned by a single individual, where the owner and the business are legally considered the same.
Drawing Account
An account used to record the amounts withdrawn by an owner from the business for personal use.
Net Income
The total profit of a company after all expenses and taxes have been subtracted from total revenue.
- Pinpoint the advantageous features of various business configurations, such as sole proprietorships, partnerships, and corporations.
Verified Answer
CB
Chakiska BrownMay 13, 2024
Final Answer :
D
Explanation :
The net income is calculated as revenues minus expenses, which is $180,000 - $75,000 = $105,000. The owner's equity at the beginning was $20,000, plus the net income of $105,000 gives $125,000, then subtracting the withdrawals of $120,000 leaves an ending capital account balance of $5,000.
Learning Objectives
- Pinpoint the advantageous features of various business configurations, such as sole proprietorships, partnerships, and corporations.