Question

Winter Company earned revenues of​ $150,000 in cash and​ $200,000 on account during 2018. Of the​ $200,000 on​ account, $63,000 was collected in cash in 2018 and the rest in 2019. The company incurred expenses of​ $115,000 in 2018 and made payments of​ $70,000 towards the expenses in 2018. What is net income in 2018 under accrual​ accounting?

Answer 1

Answer:

$235,000

Explanation:

Under the accrual accounting system, expenses are recognized in the period incurred and not necessarily in the period cash is paid.

Revenue is also recognized in the period earned and not necessarily when cash is collected.

Total revenue in 2018 = $200,000 + $150,000

= $350,000

Net income is the difference between the revenue and expense

Net income in 2018 = $350,000 - $115,000

= $235,000