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27 February, 19:40

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $360,000; Cash paid for rent, $44,000; Cash paid to employees for services rendered during the year, $124,000; Cash paid for utilities, $54,000. In addition, you determine that customers owed the company $64,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $2,400 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.

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  1. 27 February, 20:06
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    Accrual net income for the year is $ 221,600

    Explanation:

    Total revenue = Cash collected from customers + cash owed by customers

    = $360,000 + $64,000

    = $ 424,000

    Total expenses = Cash paid for rent + Cash paid to employees for services rendered during the year + Cash paid for utilities + Gas and electric company

    Rent expense per year = Total rent paid : number of years

    = $ 44,000 : 2

    = $ 22,000

    Therefore, total expense = $22,000 + $124,000 + $54,000 + $2,400

    = $ 202,400

    Net income = Total revenue - Total expense

    = $ 424,000 - $ 202,400

    = $ 221,600
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