During January 2015, the first month of operations, a consulting firm had follow
ID: 2420244 • Letter: D
Question
During January 2015, the first month of operations, a consulting firm had following transactions:
1.Issued common stock to owners in exchange for $34,000 cash.
2.Purchased $8,500 of equipment, paying $2,550 cash and signing a promissory note for $5,950.
3.Received $15,300 in cash for consulting services performed in January.
4.Purchased $2,550 of supplies on account; all of the supplies were used in January.
5.Provided consulting services on account in the amount of $27,200.
6.Paid $1,275 on account.
7.Paid $5,100 to employees for work performed during January.
8.Received a bill for utilities for January of $5,800; the bill remains unpaid..
What is subtotal of expenses that will be reported on the income statement for the month ended January 31?
A.$7,650.
B.$13,450.
C.$6,375.
D.$14,725.
Explanation / Answer
subtotal of expenses that will be reported on the income statement for the month ended January 31? is option D = $14,725
Working notes:
8.Received a bill for utilities for January of $5,800; the bill remains unpaid.
Under the accrual basis of accounting, expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.
so, as per accrual menthod the expenses which remains unchange are considered as expenses.
Purchased of a equipment is a capital asset and noit a revenue asset. under income statement only revenue items are considered. - 3.Received $15,300 in cash for consulting services performed in January.
received income is not an expenses its an income to the firm. - 4.Purchased $2,550 of supplies on account; all of the supplies were used in January.
purchase of supplies is a revenue item and also its an expenses under income statement and at the same time the supplies were used inthe same tax year. $2,500 5.Provided consulting services on account in the amount of $27,200.
the fees which are going to collect for service provided is income to the firm. its not an expenses - 6.Paid $1,275 on account.
here the amount paid for what is not mentioned. so assumed the amount paid for the expenses. $1,275 7.Paid $5,100 to employees for work performed during January.
Paid to workers as wages comes under expenses under income statement $5,100
8.Received a bill for utilities for January of $5,800; the bill remains unpaid.
Under the accrual basis of accounting, expenses are matched with the related revenues and/or are reported when the expense occurs, not when the cash is paid. The result of accrual accounting is an income statement that better measures the profitability of a company during a specific time period.
so, as per accrual menthod the expenses which remains unchange are considered as expenses.
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