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Total Spa Services earned $150,000 of service revenue during 2021. Of the $150,000 earned, the business received $135,000 in cash. The remaining amount, $15,000, was still owed by customers as of December 31. In addition, Total Spa Services incurred $78,000 of expenses during the year. As of December 31, $6,000 of the expenses still needed to be paid. In addition, Total Spa Services prepaid $9,000 cash in December 2021 for expenses incurred during the next year. A) Determine the amount of service revenue and expenses for 2021 using a cash-basis accounting system. B) Determine the amount of service revenue and expenses for 2021 using an accrual-basis accounting system.

Total Spa Services earned $150,000 of service revenue during 2021. Of the $150,000 earned, the business received $135,000 in cash. The remaining amount, $15,000, was still owed by customers as of December 31. In addition, Total Spa Services incurred $78,000 of expenses during the year. As of December 31, $6,000 of the expenses still needed to be paid. In addition, Total Spa Services prepaid $9,000 cash in December 2021 for expenses incurred during the next year. A) Determine the amount of service revenue and expenses for 2021 using a cash-basis accounting system. B) Determine the amount of service revenue and expenses for 2021 using an accrual-basis accounting system.

FINANCIAL ACCOUNTING
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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Total Spa Services earned $150,000 of service revenue during 2021. Of the $150,000 earned, the business received $135,000 in cash. The remaining amount, $15,000, was still owed by customers as of December 31. In addition, Total Spa Services incurred $78,000 of expenses during the year. As of December 31, $6,000 of the expenses still needed to be paid. In addition, Total Spa Services prepaid $9,000 cash in December 2021 for expenses incurred during the next year. A) Determine the amount of service revenue and expenses for 2021 using a cash-basis accounting system. B) Determine the amount of service revenue and expenses for 2021 using an accrual-basis accounting system.
Transcribed Image Text:Total Spa Services earned $150,000 of service revenue during 2021. Of the $150,000 earned, the business received $135,000 in cash. The remaining amount, $15,000, was still owed by customers as of December 31. In addition, Total Spa Services incurred $78,000 of expenses during the year. As of December 31, $6,000 of the expenses still needed to be paid. In addition, Total Spa Services prepaid $9,000 cash in December 2021 for expenses incurred during the next year. A) Determine the amount of service revenue and expenses for 2021 using a cash-basis accounting system. B) Determine the amount of service revenue and expenses for 2021 using an accrual-basis accounting system.
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