Crue Company had the following transactions during 2022: $\bullet$ Sales of $4,800 on account to 1$\bullet$ Collected $2,000 for services to 1.$\bullet$ Paid $1,625 cash in salaries
$\bullet$ Purchased airline tickets for $250 in December for a trip to take place in 2023
What is Crue's 2022 net income using accrual accounting-basis?

Question

Quizplus · Accepted Answer

Under accrual accounting, revenues are recognized when earned and expenses when incurred, regardless of cash flow. Sales of $4,800 and service revenue of $2,000 total $6,800 in revenue. Salaries of $1,625 are an expense, but the airline tickets for a future trip ($250) are not expensed until the trip occurs. Thus, net income is $6,800 (revenue) - $1,625 (expenses) = $5,175. However, the correct calculation should be $6,800 - $1,625 = $5,175, indicating a mistake in the explanation provided. The correct net income, considering the given options and the explanation's intent, should reflect the accurate calculation based on the accrual basis accounting principles. Therefore, the correct choice intended seems to be a misinterpretation of the calculation. Reevaluating, the accurate net income calculation for the given scenario is not correctly represented in the provided options based on the accrual accounting explanation.

Crue Company Had the Following Transactions During 2022 ∙\bullet∙ Sales of $4,800 on Account to 1

Crue Company Had the Following Transactions During 2022 $\bullet$ Sales of $4,800 on Account to 1