Winter Company earned revenues of $340,000 in cash and $425,000 on account during2020. Of the $425,000 on account, $140,000 was collected in cash in 2020 and the restin 2021. The company incurred expenses of $240,000 in 2020 and made payments of$120,000 towards the expenses in 2020. What is net income in 2020 under accrualaccounting?

Answered: Winter Company earned revenues of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter21: The Statement Of Cash Flows

Section: Chapter Questions

Problem 14E: Interest and Income Taxes Staggs Company has prepared its 2019 statement of cash flows. In...

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Winter Company earned revenues of $340,000 in cash and $425,000 on account during
2020. Of the $425,000 on account, $140,000 was collected in cash in 2020 and the rest
in 2021. The company incurred expenses of $240,000 in 2020 and made payments of
$120,000 towards the expenses in 2020. What is net income in 2020 under accrual
accounting?

Expert Solution

Step 1

In accrual accounting, revenue earned and expenses incurred shall be included in the income statement irrespective of whether or not the Company has received cash for such revenue or made payment for such expenses incurred and it will also affect the balance sheet of the company.

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