O'Brien Industries Collected $190,000 from Customers in 2018

question 94

Essay

O'Brien Industries collected $190,000 from customers in 2018. Of the amount collected, $40,000 was from revenue accrued from services performed in 2017, and $20,000 was received in advance for 2019 revenue. In addition, O'Brien earned $60,000 of revenue in 2018, which will not be collected until 2016. O'Brien also earned $25,000 of revenue in 2018 which had been collected in 2017.
O'Brien Industries paid $150,000 for expenses in 2018. Of the amount paid, $50,000 was for expenses incurred on account in 2017, $22,000 was paid in advance for 2019 expenses. In addition, O'Brien incurred $78,000 of expenses in 2018, which will not be paid until 2019. O'Brien also incurred $29,000 of expenses in 2018 which had been paid in 2017.
Instructions
(a) Compute 2018 cash-basis net income.
(b) Compute 2018 accrual-basis net income.

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Definitions:

Net Income

Net Income is the total profit of a company after all expenses and taxes have been deducted from revenue.

Variable Costs

Costs that vary in proportion to the level of production or business activity.

Fixed Costs

Expenses that do not change with the amount of goods or services produced over a short period.

Variable Costs

Costs that vary directly with the level of production or service provision.