Question

T13-1 (similar to) Question Help Total Pool Services eamed $160,000 of service revenue during 2018. Of the $160,000 camed, the business received $126,000 in cash. The remaining amount, $34,000, was still owed by customers as of December 31. In addition, Total Pool Services incurred $82,000 of expenses during the year. As of December 31, $6,000 of the expenses still needed to be paid. In addition, Total Pool Services prepaid $11,000 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 1. Determine the amount of service revenue and expenses for 2018 using a cash basis accounting system. Cash basis Service revenue Expenses Question Viewer

Answer 1

Solution:

Requirement 1. Cash Basis

Service Revenue = $126,000 (Service revenue earned only in cash)

Expenses = Total expenses incurred - Expenses still to be paid

= $82,000 - $6,000 = $76,000 (Expenses incurred only in cash)

Requirement 2. Accrual Basis

Service Revenue = $160,000 (Service revenue earned in cash or credit both for the year 2018)

Expenses = Total expenses incurred - Prepaid expenses for next year

= $82,000 - $11,000 = $71,000 (Expenses incurred for the year 2018)

(Note: Prepaid expenses of $11,000 is included in the total expenses incurred of $82,000.)

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