Question

In its first year of operations, Angela Corp. earned $47,400 in service revenue. Of that amount,...

In its first year of operations, Angela Corp. earned $47,400 in service revenue. Of that amount, $7,500 was on account and the remainder, $39,900, was collected in cash from customers.

The company incurred various expenses totalling $33,400, of which $29,900 was paid in cash. At year end, $3,500 was still owing on account. In addition, Angela prepaid $2,000 for insurance coverage that covered the last half of the first year and the first half of the second year. Angela expects to owe $3,000 of income tax when it files its corporate income tax return after year end.

Calculate the first years net income under accrual basis accounting.

Business   Accounting   
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Answer #1
Service Revenue Earned          47,400
Less: expenses accrued
Various Expenses          33,400
Insurance Expense            1,000 (2000/2)
Income tax expense            3,000
Net income under accrual basis accounting          10,000
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