In its first year of operations, Bere Company earned $27,046 in service revenue, $6,667 of which was on account and still outstanding at year-end. The remaining $20,379 was received in cash from customers.
The company incurred operating expenses of $14,655. Of these expenses $12,264 were paid in cash; $2,391 was still owed on account at year-end. In addition, Bere prepaid $3,645 for insurance coverage that would not be used until the second year of operations.
Calculate the first year's net earnings under the cash basis of accounting
I got $8115 plz check if i got it right.
To calculate the first year's net earnings under the cash basis of accounting, we need to add up the cash received from customers and subtract the cash paid for expenses.
First, let's calculate the revenue:
Cash received from customers: $20,379
Next, let's calculate the expenses:
Cash paid for operating expenses: $12,264
Now, let's calculate the net earnings:
Net earnings = Cash received from customers - Cash paid for expenses
Net earnings = $20,379 - $12,264
Net earnings = $8,115
So, your calculation of $8,115 is correct. The first year's net earnings under the cash basis of accounting is $8,115.