During 2010, Carson Network Inc., which designs network servers, earned revenues

Question

During 2010, Carson Network Inc., which designs network servers, earned revenues of $800 million. Expenses totaled $590 million. Carson collected all but $28 million of the revenues and paid $610 million on its expenses. Carson's top managers are evaluating 2010, and they ask you the following questions:

a. Under accrual accounting, what amount of revenue should Carson Network report for 2010? Is the revenue the $800 million earned or is it the amount of cash actually collected? How does the revenue principle help to answer these questions?

b. Under accrual accounting, what amount of total expense should Carson Network report for 2010-$590 million or $610 million? Which accounting principle helps to answer this question?

c. Which financial statement reports revenues and expenses? Which statement reports cash receipts and cash payments?

(If anyone can help, thank you.)

Explanation / Answer

A.) $800 million, yo urecognize revenue if you provided teh service, not when you collect the cash. Revenue is not profit B.) $590 million, because that was the expense total, you ignore what you actually pay C.) The income statement reports all revenues and expenses and gives you net income Cash receipts and cash payments are in the Statement of Cash Flows

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