I am having a problem with the following problem on accrual:
The records for a company showed the following for 2007:
Accrued expenses Jan 1 $1,800 Dec 31 $2,150
Prepaid expenses Jan 1 $ 720 Dec 31 $ 870
Cash paid during the year for expenses $42,500
Show the computation of the amount of expense that should be reported on the income statement.
I calculated it as $42,000 but I'm not sure that's correct.© BrainMass Inc. brainmass.com June 3, 2020, 8:44 pm ad1c9bdddf
The increase in accrued expense means that cash is not paid. The amount of expense for which cash is not paid is 2,150-1,800= 350.
The solution explains how to calculate the amount of expense under accrual basis.