Ward, a consultant, keeps her accounting records on a cash basis. During Year 2, Ward collected $200,000 in fees from clients. At December 31, Year 1, Ward had accounts receivable of $40,000. At December 31, Year 2, Ward had accounts receivable of $60,000, and unearned fees of $5,000. On an accrual basis, what was Ward's service revenue for Year 2?
a. $180,000
b. $215,000
c. $175,000
d. $225,000
Explanation
Choice "b" is correct. $215,000 service revenue for Year 2.
Note: Collections are $200,000 less $5,000 of unearned fees collected.
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