Question

The records for Sandhill Inc. showed the following for 2020: Jan. 1 Dec. 31 Accrued expenses $1,200 $2,100 Prepaid expenses 630 850 Cash paid during the year for expenses, $49,850 Calculate the amount of expense that should be reported on the income statement.

Answer 1

Answer:

$50,530

Explanation:

The computation of the amount of expenses reported on the income statement is shown below:

= Cash paid - Opening balance of  accrued expenses + Closing balance  accrued expenses + Opening balance of prepaid expenses - Closing balance of prepaid expenses

= $49,850 - $1,200 + $2,100 + $630 - $850

= $50,530

We added the ending balance of accrued expenses and opening balance of prepaid expenses while deducting the ending balance of accrued expenses and closing balance of prepaid expenses