Question

Item 6 In Year 1, Lee Inc. billed its customers $57,600 for services performed. The company collected $41,200 of the amount billed. Lee incurred $36,200 of other operating expenses on account. Lee paid $23,400 of the accounts payable. Lee acquired $37,000 cash from the issue of common stock. The company invested $11,000 cash in the purchase of land. Required (Hint: Identify the six events described in the paragraph and record them in general ledger accounts under an accounting equation before attempting to answer the questions.) Use the preceding information to answer the following questions: a. What amount of revenue will Lee report on the Year 1 income statement

Answer 1

Answer: $57,600

Explanation:

Accounting works by the Accrual basis. What this means is that transactions are recorded in the period they occur not in the period they are paid for.

In the above, Lee Inc. billed its customers $57,600 for services performed during the year. This is a service company and since their revenue comes from billings, this is their revenue for the year.

It does not matter that some of the services have not been paid for, it matters that the services were performed during the year.