ExpertMedium1 markMultiple Choice
CPA · Question 09 · Area I: Financial Reporting
A company maintains its books on a cash basis. During Year 1, the company collected $400,000 from customers. The following balances were reported:<br/><br/>- Accounts Receivable, Jan 1: $40,000<br/>- Accounts Receivable, Dec 31: $55,000<br/>- Unearned Revenue, Jan 1: $10,000<br/>- Unearned Revenue, Dec 31: $6,000<br/><br/>What is the accrual basis revenue for Year 1?
A company maintains its books on a cash basis. During Year 1, the company collected $400,000 from customers. The following balances were reported:<br/><br/>- Accounts Receivable, Jan 1: $40,000<br/>- Accounts Receivable, Dec 31: $55,000<br/>- Unearned Revenue, Jan 1: $10,000<br/>- Unearned Revenue, Dec 31: $6,000<br/><br/>What is the accrual basis revenue for Year 1?
Answer options:
A.
$400,000
B.
$411,000
C.
$419,000
D.
$381,000
How to approach this question
Start with Cash Collected. Add increase in AR (revenue earned not collected). Subtract decrease in AR. Add decrease in Unearned Revenue (earned this year). Subtract increase in Unearned Revenue.
Full Answer
C.$419,000✓ Correct
C
Cash Collected: $400,000<br/>+ Increase in AR ($55k - $40k): $15,000 (Earned but not collected)<br/>+ Decrease in Unearned ($10k - $6k): $4,000 (Earned, cash collected prior)<br/>Accrual Revenue = $400,000 + $15,000 + $4,000 = $419,000.
Common mistakes
Reversing the logic for assets vs liabilities adjustments.
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