Question

La More Company had the following transactions during 2016: Sales of $9,000 on account Collected $4,000...

La More Company had the following transactions during 2016: Sales of $9,000 on account Collected $4,000 for services to be performed in 2017 Paid $3,750 cash in salaries for 2016 Purchased airline tickets for $500 in December for a trip to take place in 2017 What is La More’s 2016 net income using accrual accounting? ​ ​$9,250 ​$9,750 ​$5,250 ​$5,750

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Answer #1
Solution:
Answer is 3rd option $5,250
Working Notes:
Notes: Under accrual accounting , net income of a particular period calculated Income earned during the period is set off against the expenses accrued during the period . Not of income received & expenses incurred during the period.
Sales $9,000
Less: Expenses
Salaries $3,750
Net Income for 2016 $5,250
Notes: $4,000 amount collected is for 2017 not for 2016 so it is not included it is amount received in advance.
$500 airline ticket is for 2017 , so it is not considered under accrual in 2016 computation it is prepaid expenses.
Please feel free to ask if anything about above solution in comment section of the question.
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