Question

Sage Company had cash receipts from customers in 2020 of $137,920. Cash payments for operating expenses were $84,990. Sage has determined that at January 1, accounts receivable was $12,330, and prepaid expenses were $19,800. At December 31, accounts receivable was $18,310, and prepaid expenses were $26,790. Compute (a) service revenue and (b) operating expenses.

Answer 1

Answer:

sales revenue for the period: $  143,900

operating expenses:               $   78,000

Explanation:

We solve for sales using the account recievable identity:

beginning account receivable + sales - collection = ending account receivable

12,330 + sales - 137,920 = 18,310

sales = 137,920 + 18,310 - 12,330 = 143,900

Then, for operating expenses, we have a prepaid expenses thus unexpired and therefore, not expenses under accrued accounting.

we solve like this:

beginning prepaid expenses    19,800

payment on expenses              84,990

total expenses payment          104,790

We now subtract the prepaid (unexpired) to get the amount accrued for the period:

104,790 - 26,790 = 78,000