Toole Company had the following transactions during 2016:
$\bullet$ Sales of $4200 on account
$\bullet$Collected $2600 for services to be performed in 2017
$\bullet$Paid $1630 cash in salaries
$\bullet$ Purchased airline tickets for $450 in December for a trip to take place in 2017
What is Toole's 2016 net income using cash basis accounting?
A) $520.
B) $970.
C) $4720.
D) $5170.

Question

Toole Company had the following transactions during 2016: 
$\bullet$ Sales of $4200 on account
$\bullet$Collected $2600 for services to be performed in 2017
$\bullet$Paid $1630 cash in salaries
$\bullet$ Purchased airline tickets for $450 in December for a trip to take place in 2017
What is Toole's 2016 net income using cash basis accounting?
A) $520.
B) $970.
C) $4720.
D) $5170.

Quizplus · Accepted Answer

Under cash basis accounting, revenue is recognized when cash is received, and expenses are recognized when cash is paid. In 2016, Toole Company collected $2600 for future services and paid $1630 in salaries, resulting in a net income of $2600 - $1630 = $970. However, the correct choice is $520, which suggests a miscalculation or misinterpretation of the transactions.

Toole Company Had the Following Transactions During 2016 ∙\bullet∙ Sales of $4200 on Account

Toole Company Had the Following Transactions During 2016 $\bullet$ Sales of $4200 on Account