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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 3-63B Revenue and Expense Recognition

Aunt Bea’s Catering Service provides catering service for special occasions. During 2019, Aunt Bea performed $228 of catering services and collected $228,200 of cash from customers. Salaries earned by Aunt Bea’s employees during 2019 were Aunt Bea paid employees $45,100 during 2019. Aunt Bea had $1,200 of supplies on hand at the beginning of the year and purchased an additional $12,640 of supplies during the year. Supplies on hand at the end of 2019 were $2,820. Other selling and administrative expenses incurred during 2019 were

Required:

  1. Calculate revenue and expenses for 2019.
  2. Prepare the 2019 income statement.
  3. CONCEPTUAL CONNECTION Describe the accounting principles used to prepare the income statement.

To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Requirement-1:

To Calculate:

The Revenue and expenses for the year 2019.

Explanation

The Revenue and expenses for the year 2019 are calculated as follows:

    Aunt Bea's Catering Service
    For the year 2019
    Revenues:
    Service revenue $228,500
    Total Revenue (A)$22...
To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Requirement-2:

To Prepare:

The Income Statement for the year 2019.

To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Requirement-3:

To Indicate:

The accounting principle used in preparing the Income Statement.

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