Question

The following information pertains to Eagle Co.'s Year 5 sales: Cash Sales Gross $ 80,000 Returns and allowances 4,000 Credit sales Gross 120,000 Discounts 6,000 On January 1, Year 5, customers owed Eagle $40,000. On December 31, Year 5, customers owed Eagle $30,000. Eagle uses the direct write-off method for bad debts. No bad debts were recorded in Year 5. Under the cash basis of accounting, what amount of net revenue should Eagle report for Year 5?

Answer 1

The amount of net revenue Eagle should report for Year 5 is $ 80,000.

Step-by-step explanation:

Under Cash basis of accounting revenue and expenses are recorded when payment against them is made or received. Expenses and revenues incurred are not relevant.

The amount of net revenue will comprises of revenue received in cash during the reporting period. Detail Calculations are given below.

Cash Sales $ 80,000

Returns and allowances ($ 4,000)

Discounts ($ 6,000)

Opening Receivable $ 40,000

Closing Receivable ($ 30,000)

Net revenue $ 80,000