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
What is Prospect Company’s net income for 2019?
a.$13,000
b.$13,800
c.$14,600
d.$93,800
