Wang Company had the following transactions during 2021:

-Sales of $10,800 on account
-Collected $4,800 for services to be performed in 2022
-Paid $2,600 cash in salaries for 2021
-Purchased airline tickets for $600 in December for a trip to take place in 2022
What is Wang's 2021 net income using accrual accounting?
A)$8,800
B)$13,600
C)$13,000
D)$8,200

Question

Wang Company had the following transactions during 2021:

-Sales of $10,800 on account
-Collected $4,800 for services to be performed in 2022
-Paid $2,600 cash in salaries for 2021
-Purchased airline tickets for $600 in December for a trip to take place in 2022
What is Wang's 2021 net income using accrual accounting?
A)$8,800
B)$13,600
C)$13,000
D)$8,200

Quizplus · Accepted Answer

Under accrual accounting, revenue is recognized when earned and expenses when incurred. Sales of $10,800 are recognized as revenue. The $4,800 collected for future services is not recognized as 2021 revenue. The $2,600 salary expense is recognized, and the $600 for airline tickets is not an expense for 2021. Thus, net income is $10,800 - $2,600 = $8,200.

Wang Company Had the Following Transactions During 2021