Question

Pina Colada Industries collected $105,000 from customers in 2019. Of the amount collected, $25,700 was for services performed in 2018. In addition, Pina Colada performed services worth $40,700 in 2019, which will not be collected until 2020. Pina Colada Industries also paid $72,900 for expenses in 2019. Of the amount paid, $30,500 was for expenses incurred on account in 2018. In addition, Pina Colada incurred $43,200 of expenses in 2019, which will not be paid until 2020. Compute 2019 cash-basis net income.

Answer 1

To calculate 2019 cash-basis net income, subtract total expenses from total revenue for 2019.

Step-by-step explanation:

2019 Cash-Basis Net Income Calculation:

Amount collected in 2019: $105,000

Services performed in 2018 and collected in 2019: $25,700

Services performed in 2019 and not collected until 2020: $40,700

Total revenue for 2019: $171,400 ($105,000 + $25,700 + $40,700)

Expenses paid in 2019: $72,900

Expenses incurred in 2018 and paid in 2019: $30,500

Expenses incurred in 2019 and not paid until 2020: $43,200

Total expenses for 2019: $146,600 ($72,900 + $30,500 + $43,200)

2019 cash-basis net income: $24,800 ($171,400 - $146,600)