Pluto Home finder (PHF), a dog placement service, operates in the US. During 2015 the company...
Pluto Home finder (PHF), a dog placement service, operates in the US. During 2015 the company earned $145,000 in revenue by providing services. However, it only collected $120,000 in revenue of cash. PHF expects to collect remaining $25,000 in 2016.
PHF also, incurred $80,000 in expenses. However, by the end of 2015, PHF had paid $75,000 of the cash owned for expenses because it has not yet paid for $5,000 to the workers who had worked for the year 2015. PHF expects to pay the $5,000 in cash to the workers in 2016.
Based on the information above, what amount of net income should PHF report in 2015 financial statements.
Homework Answers
Net income to be reported [according to the accrual basis of accounting] = $145,000-$80,000 = $65,000
If cash basis of accounting is followed the net income = $120,000-$75,000 = $45,000
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