Wang Company had the following transactions during 2013:
-Sales of $10,800 on account
-Collected $4,800 for services to be performed in 2014
-Paid $3,100 cash in salaries for 2013
-Purchased airline tickets for $600 in December for a trip to take place in 2014
What is Wang's 2013 net income using accrual accounting?
A) $8,300
B) $13,100
C) $12,500
D) $7,700

Question

Wang Company had the following transactions during 2013: 
-Sales of $10,800 on account
-Collected $4,800 for services to be performed in 2014
-Paid $3,100 cash in salaries for 2013
-Purchased airline tickets for $600 in December for a trip to take place in 2014
What is Wang's 2013 net income using accrual accounting?
A) $8,300
B) $13,100
C) $12,500
D) $7,700

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 2013 revenue. The $3,100 salary expense is recognized, and the $600 for airline tickets is not an expense for 2013. Thus, net income is $10,800 - $3,100 = $7,700.

Wang Company Had the Following Transactions During 2013