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

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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

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