In Year 1, Costello Company performed work for a customer and billed the customer $10,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred $3,000 of wage expense, but it did not pay the employees until Year 2. If Costello Company uses the cash-basis of accounting, then it will report
A) revenue of $10,000 and expense of $3,000 in Year 2.
B) revenue of $10,000 in Year 1 and expense of $3,000 in Year 2.
C) no revenue or expenses in either year.
D) revenue of $10,000 and expense of $3,000 in Year 1.
E) revenue of $10,000 in in Year 2 and expense of $3,000 in Year 1.
Answer: A) revenue of $10,000 and expense of $3,000 in Year 2.
Business
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