Question

During the month of March 2017, Weimar World, a tax-preparation service, had the following transactions. * Billed $496,000 in revenues on credit * Received $164,000 from customers' accounts receivable * Incurred expenses of $194,000 but only paid $87,700 cash for these expenses * Prepaid $32,220 for computer services to be used next month What was the company's accrual basis net income for the month? A. $302,000 B. $264,080 C. $ 41,860 D. $408,300 E. None of the above

Answer 1

Answer:

A. $302,000

Explanation:

Accrual basis: recognize income and expenses based on the date at they occur regardless of collection or payment.

sales revenue:         496,000

incurred expenses: (194,000)  

net income             302,000

The prepaid is not considered an expense under accrual basis. It will be adjusted over time.