During 2016, Sparky collected $72,000 from customers and paid $21,000 in operati

Question

During 2016, Sparky collected $72,000 from customers and paid $21,000 in operating costs. On an accrual basis, depreciation of $5,000 would be reported for the fiscal year ending December 31st. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Determine each of the following on an accrual basis: a. Revenues: b. Using the information presented in #8 above, determine Sparky's "Operating Expenses" (including Depreciation Expense) on an accrual basis: c.Using the information presented in #8 above, determine Net Income on an accrual basis (ignore income taxes):

Explanation / Answer

Revenues = Increase in accounts receivable = $4,000

Operating expenses = Cash payment + Depreciation + Decrease in prepaid expenses

                                = $21,000 + $5,000 + $2,000

                                = $28,000

Net income = Revenues – Operating expenses

                    = $4,000 - $28,000

                    = -$24,000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.