## Question

###### Use the following information for the next question. SRC showed the following Cash received from customers...

Use the following information for the next question. SRC showed the following Cash received from customers Expenses incurred, including depreciation $700 $600 Revenue earned 146 proceeds from a bank loan to purchase computer 200 Cash paid for expenses 160 Cash paid for computer to be used for 4 years with yearly straight-line depreciation of $50 340 What is SRC's net income for the year based on the accrual basis of accounting? What is SRC's net income for the year based on the accrual basis of accounting? $60 $824 $604 $554

## Answers

Under the accrual basis of accounting, the income is recognized as they are earned and expenses are recognized during the period when the revenues relating to such expenses were earned. Based on the observation of the question, we can calculate the Accrual Net income for SRC as follows:-

Net Income = Revenue Earned - Expenses incurred, including depreciation

Net Income = $700 - $146

Net Income = $554Based on the above calculation,

the correct answer is Option D - $554.Option A is incorrect. $60 is the net income if the company had followed the cash basis of accounting. Hence this option is incorrect.

Option B and Option C are incorrect based on the above calculations.

Please let me know if you have any questions via comments and all the best :)

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