Use the information given below to answer the following questions:
During 2012, a company makes credit sales of $600 000, of which $350 000 is collected at year-end. It pays $220 000 in expenses and owes $20 000 for electricity used during 2012.
-What would the profit be if cash accounting rather than accrual accounting were used?
A) $130 000
B) $110 000
C) $380 000
D) $730 000.

Question

Quizplus · Accepted Answer

Under cash accounting, the company would only recognize revenue when it is collected and expenses when they are paid. In this case, the company would recognize $350,000 in revenue and $220,000 in expenses, resulting in a profit of $130,000.

Use the Information Given Below to Answer the Following Questions