Question

The following is selected information from Windsor, Inc. for the fiscal year ending October 31, 2017.

Cash received from customers $258000
Revenue recognized 378400
Cash paid for expenses 146200
Cash paid for computers on November 1, 2016 that will be used for 3 years 41280
Expenses incurred including any depreciation 185760
Proceeds from a bank loan, part of which was used to pay for the computers 86000

Based on the accrual basis of accounting, what is Windsor's net income for the year ending October 31, 2017?

Answer 1

Net Income 192,640‬

Step-by-step explanation:

For the accrual basis, we will consider the revenue ercognized and the expenses incurred regardless, of the payment date or collection date.

This means we will not focus on cash, we will focus in the accrued revenues and expenses for the period:

Revenues 378,400

Expenses with deprecation (185,760)

Net Income 192,640‬

The cash payment on the computer and the loan are not revenues or expenses, are considered for the cash flow statement.