In its first year of operations, Cullumber Company recognized $23,520 in service revenue, $5,040 of which was on account and stilloutstanding at year-end. The remaining $18,480 was received in cash from customers.The company incurred operating expenses of $13,272. Of these expenses, $10,080 were paid in cash; $3,192 was still owed onaccount at year-end. In addition, Cullumber prepaid $2,016 for insurance coverage that would not be used until the second year ofoperations.(a) Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under theaccrual basis of accounting.Cash BasisNet earnings$+AAccrual Basis(b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers?eTextbook and Media

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Answered: In its first year of operations,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In its first year of operations, Ivanhoe Company recognized $28,560 in service revenue, $6,120 of which was on account and still outstanding at year-end. The remaining $22,440 was received in cash from customers. The company incurred operating expenses of $16,116. Of these expenses, $12,240 were paid in cash; $3,876 was still owed on account at year-end. In addition, Ivanhoe prepaid $2,448 for insurance coverage that would not be used until the second year of operations. (a) Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under the accrual basis of accounting. Cash Basis Net Income $ Accrual Basis $ (b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers?
In its first year of operations, Sheridan Company recognized $30,000 in service revenue, $7,200 of which was on account and still outstanding at year-end. The remaining $22,800 was received in cash from customers. The company incurred operating expenses of $16,600. Of these expenses, $13,520 were paid in cash; $3,080 was still owed on account at year-end. In addition, Sheridan prepaid $2.650 for insurance coverage that would not be used until the second year of operations. (a) Calculate the first year's net earnings under the cash basis of accounting, and the first year's net earnings under the accrual basis of accounting Net Income Cash Basis $ Accrual Basis
In its first year of operations, Crane Company recognized $22,400 in service revenue, $4,800 of which was on account and still outstanding at year-end. The remaining $17,600 was received in cash from customers.The company incurred operating expenses of $12,640. Of these expenses, $9,600 were paid in cash; $3,040 was still owed on account at year-end. In addition, Crane prepaid $1,920 for insurance coverage that would not be used until the second year of operations.Calculate the first year’s net earnings under the cash basis of accounting, and calculate the first year’s net earnings under the accrual basis of accounting.
In its first year of operations, Crane Company recognized $22,400 in service revenue, $4,800 of which was on account and still outstanding at year-end. The remaining $17,600 was received in cash from customers.The company incurred operating expenses of $12,640. Of these expenses, $9,600 were paid in cash; $3,040 was still owed on account at year-end. In addition, Crane prepaid $1,920 for insurance coverage that would not be used until the second year of operations.(a) Calculate the first year’s net earnings under the cash basis of accounting, and calculate the first year’s net earnings under the accrual basis of accounting. Cash Basis Accrual Basis Net Income $enter net income in dollars $enter net income in dollars (b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers? select the basis of accounting Accrual basis Cash basis
In its first year of operations, Wildhorse Co. recognized $30,800 in service revenue, $6,600 of which was on account and still outstanding at year-end. The remaining $24,200 was received in cash from customers. The company incurred operating expenses of $17,380. Of these expenses, $13,200 were paid in cash; $4,180 was still owed on account at year-end. In addition, Wildhorse prepaid $2,640 for insurance coverage that would not be used until the second year of operations. (a) Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under the accrual basis of accounting. Net Income Cash Basis Accrual Basis (b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers?
In its first year of operations, Wildhorse Company recognized $36,400 in service revenue, $7,800 of which was on account and still outstanding at year-end. The remaining $28,600 was received in cash from customers. The company incurred operating expenses of $20,540. Of these expenses, $15,600 were paid in cash; $4,940 was still owed on account at year-end. In addition, Wildhorse prepaid $3,120 for insurance coverage that would not be used until the second year of operations. (a) Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under the accrual basis of accounting. Net earnings $ Cash basis Cash Basis eTextbook and Media $ (b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers? Accrual Basis
In its first year of operations, Pharoah Company recognized $ 31,800 in service revenue, $ 6,400 of which was on account and still outstanding at year-end. The remaining $ 25,400 was received in cash from customers. The company incurred operating expenses of $ 16,600. Of these expenses, $ 12,730 were paid in cash; $ 3,870 was still owed on account at year-end. In addition, Pharoah prepaid $ 2,390 for insurance coverage that would not be used until the second year of operations. Calculate the fırst year's net earnings under the cash basis of accounting, and the first year's net earnings under the accrual basis of accounting. Cash Basis Accrual Basis Net Income $ 2$ eTextbook and Media Which basis of accounting (cash or accrual) provides more useful information for decision-makers?
In its first year of operations, Maria Corp.earned 48,100 in service revenue.Of that amount, 8,200 was on account and the remainder, 39, 900, was collected in cash from customers. The company incurred various expenses totalling 32,300, of which 28,800 was paid in cash. At the year end, 3,500 was still owing on account. In addition, Maria prepaid 2,000 for insurance coverage that covered the last half of the first year and the first half of the second year. maria expects to owe 3000 of income tax when it files its corporate income tax return after year end.
During its first year of operations, Cooper Company bills credit customers $19,800 for services rendered. During the year, Cooper receives $16,500 from all customers, $3,700 of which is received from cash customers. Required: What amount of revenue should be shown on the income statement for the year?
During the year Tulip reported net sales of $960,000. The company had accounts receivable of $75,000 at the beginning of the year and $120,000 at the end of the year Compute Tulip’s average collection period (assume 365 days a year.)
During its first year of operations, Mack's Plumbing Supply Co. had sales of $6,740,000, wrote off $48,600 of accounts as uncollectible using the direct write-off method, and reported net income of $712,500. Assume that during the second year of operations Mack's Plumbing Supply Co. had sales of $7,450,000, wrote off $52,000 of accounts as uncollectible using the direct write-off method, and reported net income of $800,000. a. Determine what net income would have been in the second year if the allowance method (using 1% of sales) had been used in both the first and second years.$fill in the blank 1 b. Determine what the balance of the allowance for doubtful accounts would have been at the end of the second year if the allowance method had been used in both the first and second years.$fill in the blank 2
Klein Corporation reports the following summary data for the current year: Sales revenue totaled $130,750. Interest revenue for the period was $1,100. Interest expense for the period was $2,900. Cost of goods sold for the period was $83,000. Operating expenses, all paid in cash (except for depreciation of $7,500), were $24,000. Income tax expense for the period was $6.500. Accounts receivable (net) increased by $5,000 during the period. Accounts payable increased by $2,500 during the period. Inventory at the beginning and end of the period was $17,500 and $12,500, respectively. Cash increased during the period by $2,500. Assume all other current asset and current liability accounts remained constant during the period. Enter your answers as positive numbers. Compute the amount of cash collected from customers. Compute the amount of cash paid for inventory. Compute the amount of cash paid for operating expenses. Compute the amount of cash flows provided by (used in) operations. What…

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