The records for Sandhill Inc. show the following for 2020: Jan. 1 Dec. 31 Accrued expenses $1,200 $2,100 Prepaid expenses 630 850 Cash paid during the year for expenses, $49,850 Calculate the amount of expense that should be reported on the income statement.

To determine the amount of expenses reported on the income statement, we'll use the adjustment method to account for changes in accrued and prepaid expenses throughout the year.

The formula to calculate the amount of expenses reported on the income statement is:

Expenses reported on income statement =

 Cash paid for expenses+Increase in prepaid expenses − Increase in accrued expenses

Given:

Cash paid for expenses during the year = $49,850

Increase in prepaid expenses = $850 (Dec. 31) - $630 (Jan. 1) = $220

Increase in accrued expenses = $2,100 (Dec. 31) - $1,200 (Jan. 1) = $900

Now, plug these values into the formula:

Expenses reported on income statement = 49,850 + 220 − 900

Expenses reported on income statement = 49,850 + 220 − 900

Expenses reported on income statement = 49,170

Therefore, the amount of expenses that should be reported on the income statement for the year is $49,170.