Question

On June 12, Carpenter Printing printed $18,279 in magazines for the Pierre Company. The magazines were delivered on June 15, along with an invoice for $6,316 due July 15. Per the contract negotiated by the Pierre Company with Carpenter Printing, $4,681 will be invoiced in July and will be due August 15; the remainder will be invoiced in August and will be due September 15. On June 18, Cecil Advertising Agency signed a contract with Carpenter Printing to print advertisements, paying $19,769 in advance. $11,311 in advertisements are contracted to be printed in June and $31,994 in advertisements are contracted to be printed in July. On June 30, $12,397 of advertisements were printed and delivered to Cecil Advertising. On June 30, $3,072of the $15,872 in supplies remaining on May 31 have not been used. Based on these transactions alone, what is the effect on the Net Income on the Income Statement on June 30? The correct answer is 17,876. But how do you get this answer?

Answer 1

Effect on the Net Income on the Income Statement on June 30: $17876

Revenue:
From Pierre Company	18279
From Cecil Advertising Agency	12397
Total revenue		30676
Less: Expenses
Supplies expense ($15872 - $3072)		12800
Net income $		17876

Since $18279 in magazines is printed and delivered to Pierre Company on June 15, the entire amount will be recognized in June though the invoicing has been deferred.

In case of Cecil Advertising Agency, $12397 of advertisements were printed and delivered on June 30. Hence, revenue for the same will be recognized in June.