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7 August, 17:51

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $335,000; Cash paid for rent, $39,000; Cash paid to employees for services rendered during the year, $119,000; Cash paid for utilities, $49,000. In addition, you determine that customers owed the company $59,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $1,900 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.

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  1. 7 August, 18:33
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    The accrual net income for the year is $204,600

    Explanation:

    The computation of the accrual net income for the year is shown below:

    Net income = Revenue - expenditure

    where,

    Revenue = Cash collected from customers + customers owed at the end of the year

    And, the expenditure = Cash paid for rent + Cash paid to employees for services rendered during the year + Cash paid for utilities + gas and electric expenses

    Now put these values to the above formula

    So, the answer would be equal to

    = Cash collected from customers + customers owed at the end of the year - Cash paid for rent - Cash paid to employees for services rendered during the year - Cash paid for utilities - gas and electric expenses

    = $335,000 + $59,000 - $19,500 - $119,000 - $49,000 - $1,900

    = $204,600

    The rent payment is given for two years but we have to compute for the one year only

    So, rent payment = $39,000 : 2 = $19,500
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