During teh month of August 2014, ADC Co, a CPA service, had the following transa

Question

During teh month of August 2014, ADC Co, a CPA service, had the following transactions:

Billed $48,000 in revenues on credit

Received $2,000 from customers' accounts receivable

Incurred expenses of $6,000 but only paid $5,750 cash for these expenses

Prepaid $1,110 for computer services to be used next month

Incurred wage expense of $100 but to be paid next month

Used office building for the month; depreciation expenseof $4,000 not yet recorded

What was the company's accrual basis net income for the month and why?

Explanation / Answer

Solution:

Income Statement - ADC Co - August 2014 Particulars Amount Revenue $48,000.00 Expenses Incurred $6,000.00 Wage Expense $100.00 Depreciation on office building $4,000.00 Accrual basis net income $37,900.00

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