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Q.ITI-1

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Horngren'S Financial And Managerial Accounting
Found in: Page 122

Short Answer

Question: Total Pool Services earned $130,000 of service revenue during 2018. Of the $130,000 earned, the business received $105,000 in cash. The remaining amount, $25,000, was still owed by customers as of December 31. In addition, Total Pool Services incurred $85,000 of expenses during the year. As of December 31, $10,000 of the expenses still needed to be paid. In addition, Total Pool Services prepaid $5,000 cash in December 2018 for expenses incurred during the next year. 1. Determine the amount of service revenue and expenses for 2018 using a cash basis accounting system. 2. Determine the amount of service revenue and expenses for 2018 using an accrual basis accounting system.

Answer

Service revenue equals $105,000 and expenses equals $80,000

See the step by step solution

Step by Step Solution

Step 1: Explanation on Service Revenue

Expenses are calculated as follows:

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