Question

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $340,000; Cash paid for rent, $40,000; Cash paid to employees for services rendered during the year, $120,000; Cash paid for utilities, $50,000. In addition, you determine that customers owed the company $60,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $2,000 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.

Answer 1

Answer:

$208,000

Explanation:

Net income= Revenue -expenses

The first step is to calculate the total revenue

Total revenue= credit sales+cash collected from customers

= $60,000 + $340,000

= $400,000

The total expenses can be calculated as follows

= Rent expense + salaries expense + utilities expense

= (40,000/2)+$120,000 + ($50,000 + $2,000)

= $20,000 + $120,000 + $52,000

= $192,000

Therefore the accrual net income for the year can be calculated as follows

= $400,000 - $192,000

= $208,000

Hence the accural net income for the year is $208,000