Wong Ho Company had the following transactions during 2013:
-Sales of ¥11,000 on account
-Collected ¥4,000 for services to be performed in 2014
-Paid ¥1,250 cash in salaries
-Purchased airline tickets for ¥500 in December for a trip to take place in 2014
What is Wong Ho's 2013 net income using accrual accounting?
A) ¥9,750.
B) ¥13,750.
C) ¥13,250.
D) ¥9,250.

Question

Wong Ho Company had the following transactions during 2013: 
-Sales of ¥11,000 on account
-Collected ¥4,000 for services to be performed in 2014
-Paid ¥1,250 cash in salaries
-Purchased airline tickets for ¥500 in December for a trip to take place in 2014
What is Wong Ho's 2013 net income using accrual accounting?
A) ¥9,750.
B) ¥13,750.
C) ¥13,250.
D) ¥9,250.

Quizplus · Accepted Answer

Under accrual accounting, revenue is recognized when earned and expenses when incurred. Sales of ¥11,000 are recognized as revenue. The ¥4,000 collected for future services is not recognized as 2013 revenue. The salary expense of ¥1,250 is recognized, and the airline ticket expense is not recognized until 2014. Thus, net income is ¥11,000 - ¥1,250 = ¥9,750.

Wong Ho Company Had the Following Transactions During 2013