
Consider the following information:
1. Service Revenue for the year = $80,000. Of this amount, $70,000 is collected during the year and $10,000 is expected to be collected next year.
2. Salaries Expense for the year = $40,000. Of this amount, $35,000 is paid during the year and $5,000 is expected to be paid next year.
3. Advertising Expense for the year = $10,000. All of this amount is paid during the year.
4. Supplies Expense for the year = $4,000. No supplies were purchased during the year.
5. Utilities Expense for the year = $12,000. Of this amount, $11,000 is paid during the year and $1,000 is expected to be paid next year.
6. Cash collected in advance from customers for services to be provided next war (Unearned Revenue) = $2,000.
Required:
1. Calculate operating
2. Calculate net income.
3. Explain why these two amounts differ.

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Chapter 4 Solutions
Financial Accounting
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