Crue Company had the following transactions during 2022: $\bullet$ Sales of $4,500 on account to 1.$\bullet$ Collected $2,500 for services to 1.$\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 net income using cash-basis accounting?

Question

Quizplus · Accepted Answer

Cash-basis accounting only recognizes transactions when cash is received or paid. Based on the given transactions, the total cash collected is $2,500 and the total cash paid is $1,625, resulting in a net income of $875 ($2,500 - $1,625 = $875). The sale of $4,500 on account is not included in the calculation as it has not been collected in cash yet. The purchase of airline tickets for a future trip is also not included as it does not affect the current year's net income.

Crue Company Had the Following Transactions During 2022 ∙\bullet∙ Sales of $4,500 on Account to 1

Crue Company Had the Following Transactions During 2022 $\bullet$ Sales of $4,500 on Account to 1