Question

For 2016, RWC earned revenues totaling $250,000. Of that $250,000, $200,000 was collected immediately. In addition, the $20,000 left as accounts receivable from 2015 was collected as well. Accrued expenses throughout 2016 totaled to $190,000 and total cash paid for expenses and other items was $170,000. What would company report on their income statement for Net Income under Accrual Accounting?

Answer 1

Answer:

$60,000

Explanation:

Under accrual basis of accounting,  

Revenues are recorded when it's earned, it does not base on when it is collected.

So the Revenues for 2016 should be $250,000 alone.

Similarly, expenses are recorded when it is incurred rather than when it is paid.

So the Expenses for 2016 should only be $190,000

As a result, the Net Income is $60,000 ($250,000 - $190,000)