A business has the following transactions:• The business is started by receiving cash from aninvestor in exchange for common stock $20,000.• The business purchases supplies on account $800.• The business purchases furniture on account $3,000.• The business renders services to various clients onaccount totaling $8,000.• The business pays salaries $2,800.• The business pays this month's rent $3,700.• The business pays for the supplies purchased onaccount.• The business collects from one of its clients forservices rendered earlier in the month $1,600.What is total income for the month?Net income $|

Revenue is the aggregate income amount generated through the sale of services or the goods to the…

A business has the following transactions: • The business is started by receiving cash from an investor in exchange for common stock $20,000. • The business purchases supplies on account $800. • The business purchases furniture on account $3,000. • The business renders services to various clients on account totaling $8,000.

A business has the following transactions: • The business is started by receiving cash from an investor in exchange for common stock $20,000. • The business purchases supplies on account $800. • The business purchases furniture on account $3,000. • The business renders services to various clients on account totaling $8,000.

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 46P: Blue Company, an architectural firm, has a bookkeeper who maintains a cash receipts and...

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Blue Company, an architectural firm, has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2019), the company hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. The total cash receipts are summarized as follows. The accounts receivable from customers at the end of the year are 120,000. You note that the accounts receivable at the beginning of the year were 190,000. The cash sales included 30,000 of prepayments for services to be provided over the period January 1, 2019, through December 31, 2021. a. Compute the companys accrual basis gross income for 2019. b. Would you recommend that Blue use the cash method or the accrual method? Why? c. The company does not maintain an allowance for uncollectible accounts. Would you recommend that such an allowance be established for tax purposes? Explain.
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Safe Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Safe Home has collected $1,130 from cash-paying customers. Safe Home's remaining customers owe the business $320. Safe Home recorded $1,130 of service revenue for the year. Cash basis If Safe Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? Splendid Occasions received $2,080 for services to be performed for the next 8 months on March 31 and recorded this transaction using the Unearned Revenue account. Accrual basis If Splendid Occasions had recorded their service revenue using the other method, how much service revenue would they have recorded for the year?
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