Use the following information for questions
Ling Company had the following transactions during 2011:
$\bullet$Sales of ¥9,000 on account
$\bullet$Collected ¥4,000 for services to be performed in 2012
$\bullet$Paid ¥1,250 cash in salaries
$\bullet$Purchased airline tickets for ¥500 in December for a trip to take place in 2012
-What is Ling's 2011 net income using accrual accounting?

Question

Use the following information for questions 
Ling Company had the following transactions during 2011:
$\bullet$Sales of ¥9,000 on account
$\bullet$Collected ¥4,000 for services to be performed in 2012
$\bullet$Paid ¥1,250 cash in salaries
$\bullet$Purchased airline tickets for ¥500 in December for a trip to take place in 2012
-What is Ling's 2011 net income using accrual accounting?

Quizplus · Accepted Answer

Under accrual accounting, revenue is recognized when earned and expenses when incurred. Ling's net income for 2011 is calculated as: Sales of ¥9,000 (earned in 2011) minus salaries paid ¥1,250. The collected ¥4,000 is for future services and not recognized in 2011, and the ¥500 for airline tickets is a prepaid expense for 2012. Thus, net income is ¥9,000 - ¥1,250 = ¥7,750.

Use the Following Information for Questions Ling Company Had ∙\bullet∙

Use the Following Information for Questions
Ling Company Had $\bullet$