Crue Company had the following transactions during 2018:
.Sales of $4,800 on account
.Collected $2,000 for services to be performed in 2019
.Paid $1,625 cash in salaries
.Purchased airline tickets for $250 in December for a trip to take place in 2019
What is Crue's 2018 net income using accrual accounting-basis after accrual?
A) $2,925.
B) $3,175.
C) $4,925.
D) $5,175.

Question

Quizplus · Accepted Answer

Using accrual accounting-basis after accrual, the $4,800 in sales on account is recognized as revenue in 2018, even if payment is not received until later. The $2,000 collected for services to be performed in 2019 is recognized as unearned revenue in 2018 since the services have not yet been provided. The $1,625 in cash paid for salaries is recognized as an expense in 2018. The $250 paid for airline tickets in December for a trip in 2019 is not recognized as an expense in 2018 since it relates to a future period.

Net income = revenue - expenses
Net income = $4,800 - $1,625
Net income = $3,175

Crue Company Had the Following Transactions During 2018