Splash Company washed 130 cars this past month. They charge $10 per car for a wa

ID: 2337692 • Letter: S

Question

Splash Company washed 130 cars this past month. They charge $10 per car for a wash. The company's only expenses during this month were $93 utilities/water, $300 wages and $41 for soap The wages were paid during the month, but the utility bill and soap bills were not What is Splash Company income or loss for this month? · It s impossible to calculate from the given information because the amount of revenue received in cash is not known. O B. $866 net income O C. $1,000 net income O D. $907 net income

Explanation / Answer

Correct Answer --- (B) $866 net income

Calculations and Explanation

SPLASH COMPANY

Income Statement

Service revenue

$ 1,300.00*

Operating expenses

Utilities expense

$ 93.00

Wages

$ 300.00

Supplies expense (Soaps)

$ 41.00

Total Operating Expenses

$ 434.00

Net operating Income

$ 866.00

*130 cash wash X $10= $1300

It does not matter whether expenses are paid in cash in current period or will be paid in future. Expenses are recorded as and when they occur. Accrual accounting states that expenses should be recognized when they occur.