
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.

Want to see the full answer?
Check out a sample textbook solution
Chapter 4 Solutions
Financial Accounting
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





