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29 April, 10:55

A company maintains its records using cash-basis accounting. During the year, the company received cash from customers, $32,000, and paid cash for salaries, $24,000. At the beginning of the year, customers owe the company $3,000. By the end of the year, customers owe $5,500. At the beginning of the year, the company owes salaries of $3,100. At the end of the year, the company owes salaries of $5,700. Determine cash-basis net income and accrual-basis net income for the year.

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  1. 29 April, 11:00
    0
    Cash-basis net income: $8,000

    Accrual-basis net income: $7,900

    Explanation:

    A company maintains its records using cash-basis accounting. During the year, the company received cash from customers, $32,000, and paid cash for salaries, $24,000. At the beginning of the year, customers owe the company $3,000. By the end of the year, customers owe $5,500. At the beginning of the year, the company owes salaries of $3,100. At the end of the year, the company owes salaries of $5,700. Therefore, the Cash-basis net income is $8,000 and the Accrual-basis net income is $7,900.
  2. 29 April, 11:16
    0
    net income cash-basis 8,000

    income accrual-basis 7,900

    Explanation:

    cash revenues 32,000

    salaries expense (24,000)

    net income cash-basis 8,000

    sales for the period:

    beginning AR + sales - collected = ending AR

    3,000 + sales - 32,000 = 5,500

    sales = 34,500

    salaries expense:

    beginning salaries payables + salaries - paid = ending salaries payable

    3,100 + salaries - 24,000 = 5,700

    salaries 26,600

    revenues 34,500

    salaries (26,600)

    income accrual-basis 7,900
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