Revenue Recognition and Matching Carrico Advertising, Inc. performs advertising

Question

Revenue Recognition and Matching Carrico Advertising, Inc. performs advertising services for several Fortune 500 companies. The following information describes Carrico's activities during 2011. At the beginning of 2011, customers owed Carrico $45,800 for advertising services performed during 2010. During 2011, Carrico performed an additional $695,100 of advertising services on account. Carrico collected $708,700 cash from customers during 2011. At the beginning of 2011, Carrico had $13,350 of supplies on hand for which it owed suppliers $8,150. During 2011, Carrico purchased an additional $14,600 of supplies on account. Carrico also paid $19,300 cash owed to suppliers for goods previously purchased on credit. Carrico had $2,230 of supplies on hand at the end of 2011. Carrico's 2011 operating and interest expenses were $437,600 and $133,400, respectively. 1. Calculate Carrico's 2011 income before taxes. $

Explanation / Answer

Opening Debtors

45800

Service s performed

695100

Collections from debtors

-708700

Closing debtors

32200

Opening Payables

8150

Purchase of supplies

14600

Payments

-19300

Closing payables

3450

Opening Supplies

13350

Purchase of supplies

14600

Closing supplies

-2230

Supplies consumed

25720

Income Statement:

Services performed

695100

Supplies Consumed

-25720

Operating Expenses

-437600

Tax Expense

-133400

Income

98380

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Opening Debtors

45800

Service s performed

695100

Collections from debtors

-708700

Closing debtors

32200

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