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7 April, 16:52

Molly's Auto Detailers maintains its records on the cash basis. During 2018, Molly's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Molly's accrual basis net income was:

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  1. 7 April, 17:06
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    Answer: $49,000

    Explanation:

    Total Revenue:

    = cash revenue + increase In accounts receivables + decrease in accrued liability

    = $72,000 + $4,000 + $1,000

    = $77,000

    Net income accrual method:

    = Total Revenue - cash expenses - depreciation expense - decrease in prepaid expenses

    = $77,000 - $21,000 - $5,000 - $2,000

    = $49,000
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