Question

QUESTION 21 During April 2020, a company had the following transactions: Credit sales of $2,400 (cost of goods sold $1,000). Received $300 from a customer for services that will be provided in May. Purchased inventory for $4,500, paid $2,700 and the rest will be paid in 30 days. Purchased and paid $560 for supplies still on hand. Paid $960 in wages. Profit for April 2020 according to accrual accounting is: A. $440 B. $180 C. $740 D. None of the above

Answer 1

Sales revenue = $2,400

Cost of goods sold = $1,000

Wages expense = $960

Income Statement
Sales revenue	2,400
Less- Expenses:
Cost of goods sold	-1,000
Wages expense	-960
Profit	$440

Profit for April 2020 according to accrual accounting is $440.

Correct option is A.

Other items given in the question are not relevant to calculate net income as per accrual accounting.

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