On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $2,000,000. The company provided $6,400,000 of services in June and received full payment in July. Royal also incurred expenses of $3,000,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $1,000,000. What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting?
A) Option a
B) Option b
C) Option c
D) Option d

Question

On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $2,000,000. The company provided $6,400,000 of services in June and received full payment in July. Royal also incurred expenses of $3,000,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $1,000,000. What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting? 
A) Option a 
B) Option b 
C) Option c 
D) Option d

Quizplus · Accepted Answer

11ea937b_3669_9180_a419_67194837800e_TB2599_00 Investment by shareholders and dividends to shareholders do not affect net income for either basis of accounting.