The following accounts are taken from the December 31, 2010, financial statement
ID: 2487983 • Letter: T
Question
The following accounts are taken from the December 31, 2010, financial statements of A to Z Advertising Company Advertising revenue Cash Accounts receivable Interest expense Accounts payable Operating expenses Unearned revenue Equipment Income tax expense 46,882 1,556 7,336 2,319 5,040 37,660 1,218 18,448 2,366 The following activities occurred In 2011: 1. Billed customers for advertising services rendered, $55,400 2. Recelved cash from customers In paýment of their accounts, $10,600. 3. Incurred $45,200 of operating expenses of which $39,200 was pald in cash and $6,000 was on account and unpald as of the end of the year. 4. Pald suppliers $5,400 on the accounts payable. 5. Recelved deposits from customers of $2,540 for advertising services to be performed in 2012.Explanation / Answer
1.
Net income
Advertising revenue 46882
Less: Operating expenses 37660
Operating income 9222
Less: Interest expense 2319
Net profit before tax 6903
Less: Income tax expense 2366
Net Income 4537
2.
Opening balance of accounts receivable on Jan 1, 2011 7336
Less: Cash received against accounts receivable during 2011 10600
Add: New accounts receivables billed for services 55400
Balance of accounts receivable on Dec 31,2011 52136