La More Company had the following transactions during 2022.
$\bullet$Sales of $9000 on account
$\bullet$Collected $4000 for services to be performed in 2023
$\bullet$Paid $2650 cash in salaries
$\bullet$Purchased airline tickets for $500 in December for a trip to take place in 2023
What is La More's 2022 net income using cash basis accounting?

Question

La More Company had the following transactions during 2022. 
$\bullet$Sales of $9000 on account
$\bullet$Collected $4000 for services to be performed in 2023
$\bullet$Paid $2650 cash in salaries
$\bullet$Purchased airline tickets for $500 in December for a trip to take place in 2023
What is La More's 2022 net income using cash basis accounting?

Quizplus · Accepted Answer

Under cash basis accounting, revenue is recognized when cash is received, and expenses are recognized when cash is paid. In 2022, La More Company collected $4000 for future services and paid $2650 in salaries, resulting in a net income of $1350 ($4000 - $2650). The purchase of airline tickets is not an expense until the trip occurs.

La More Company Had the Following Transactions During 2022 ∙\bullet∙ Sales of $9000 on Account

La More Company Had the Following Transactions During 2022 $\bullet$ Sales of $9000 on Account