The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.

The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.What is the amount of revenue that will be reported on the income statement for the year ended December 31,2016?
A) $57,500.
B) $39,000.
C) $55,000.
D) $50,000.

Question

The following account balances are taken from the December 31, 2015, financial statements of ABZ Advertising Company.The company uses accrual basis accounting.
  
The following activities occurred in 2016:
1.Performed advertising services on account, $55,000.
2.Received cash payments on account, $10,400.
3.Received deposits from customers for advertising services to be performed in 2017, $2,500.
4.Made payments to suppliers on account, $5,000.
5.Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on account and unpaid as of the end of the year.
-Use the information above to answer the following question.What is the amount of revenue that will be reported on the income statement for the year ended December 31,2016?
A) $57,500. 
B) $39,000. 
C) $55,000. 
D) $50,000.

Quizplus · Accepted Answer

The amount of revenue that will be reported on the income statement for the year ended December 31, 2016, is $55,000. This is because services were performed on account for $55,000 during the year, and revenue is recognized when services are performed, regardless of when the cash is received. Option A is incorrect because it adds the cash received on account to the revenue, which would result in double-counting the revenue. Option B is incorrect because it only includes the cash received, not the full amount of services performed. Option D is incorrect because it does not account for the full amount of services performed, only the cash payments made.

The Following Account Balances Are Taken from the December 31