Reference no: EM132521079

Question - Prospect Company began operations on May 1, 2019, and experienced the following events during the year:

1. Purchased $80,000 of merchandise inventory for cash

2. Sold all the merchandise for $120,000 cash and guaranteed the merchandise sold to be free from defects for one year following the date of sale.

3. Paid $25,000 cash for salaries expense.

4. Estimated future warranty liability of $1,200 (1% of sales).

5. Paid $800 cash to repair defective merchandise returned by a customer

Required - What is Prospect Company's net income for 2019?

a. $13,000

b. $13,800

c. $14,600

d. $93,800