Question

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $370,000; Cash paid for rent, $46,000; Cash paid to employees for services rendered during the year, $126,000; Cash paid for utilities, $56,000.In addition, you determine that customers owed the company $52,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $1,200 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.

Answer 1

Answer:

Accrual Net Income = $215,800

Explanation:

Rent expense incurred =Totalrentpaid /TotalNumberofyears

​Rent expense incurred = $46,000​ / 2years

Rent expense incurred = $23,000​

Working notes

Total revenue=Sum of total revenue earned during the period

Total revenue = Cash collected from customers + amount owed by the customers at they earned​​

Total revenue = $370,000 + $52,000

Total revenue = $422,000

Total expenses= Sum of total expenses incurred by the company

Total expenses = Cash paid for rent expense + cash paid for employees salaries + cash paid for utilities + gas and electric expenses accrued​​

Total expenses = $23,000 + $126,000 + $56,000 + $1,200

Total expenses = $206,200

Net Income = Total revenue - Total expenses

Accrual Net Income = $422,000 - $206,200

Accrual Net Income = $215,800