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28 May, 06:35

Summarized operations for Splish Brothers Inc. for the month of July are as follows. Revenues recognized: for cash $30,000; on account $71,480. Expenses incurred: for cash $26,120; on account $41,220. Indicate for Splish Brothers Inc. (a) the total revenues, (b) the total expenses, (c) net income for the month of July.

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  1. 28 May, 07:02
    0
    a. Total Revenues are $ 101,480

    b. Total expenses are $ 67,340

    Net income for July is $ 34,140

    Explanation:

    Total Revenues is Cash revenue + Revenues on credit

    $ 30,000 (cash) + $ 71,480 (on credit) = $ 101,480

    Total expenses is Cash expenses + Expenses on account

    $ 26,120 (cash) + $ 41,220 (on account) = $ 67,340

    Net income = Total revenues - Total expenses

    Net Income = $ 101,480 - $ 67,340 = $ 34,140
  2. 28 May, 09:29
    0
    Total revenue is $111,480

    Total expenses is $67340

    Net income $44140

    Explanation:

    Total revenue is a combination of cash and credit sales, which is calculated as follows:

    Cash sales $30000

    Credit sales $71480

    Total sales $111,480

    Total expenses could be determined by summing up the expenses paid for in cash and those incurred on account, calculation of which is shown below:

    Cash expenses $26120

    Expenses on account $41220

    Total expenses $67340

    Net income = total sales - total expenses

    Net income = $111480-$67340

    Net income = $44140

    The rationale for including revenue and expenses on account is that accrual basis of accounting is being used, where revenue is recognized when earned and expenses when incurred.
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