Crue Company had the following transactions during 2015:
-Sales of $4,800 on account
-Collected $2,000 for services to be performed in 2016
-Paid $1,625 cash in salaries
-Purchased airline tickets for $250 in December for a trip to take place in 2016
What is Crue's 2015 net income using accrual accounting?
A)$2,925.
B)$3,175.
C)$4,925.
D)$5,175.

Question

Quizplus · Accepted Answer

In accrual accounting, revenue is recognized when earned and expenses are recognized when incurred. Therefore, the sales of $4,800 and the $2,000 collected for services to be performed in 2016 are not recognized as revenue in 2015. The $1,625 paid in salaries is recognized as an expense in 2015. The purchase of airline tickets for a trip in 2016 is not recognized as an expense in 2015. Therefore, the net income for 2015 is $4,800 (revenue) - $1,625 (expenses) = $3,175.

Crue Company Had the Following Transactions During 2015