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9 September, 02:15

Skysong Industries collected $104,000 from customers in 2020. Of the amount collected, $25,500 was for services performed in 2019. In addition, Skysong performed services worth $38,600 in 2020, which will not be collected until 2021. Skysong Industries also paid $71,700 for expenses in 2020. Of the amount paid, $30,400 was for expenses incurred on account in 2019. In addition, Skysong incurred $42,900 of expenses in 2020, which will not be paid until 2021. (a) Compute 2020 cash-basis net income.

(b) Compute 2020 accrual-basis net income.

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  1. 9 September, 02:27
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    a. $32,300

    b. $32,900

    Explanation:

    The computation of given question is shown below:

    a. Cash basis net income is

    = Collection from customers - Paid expenses

    = $104,000 - $71,700

    = $32,300

    b. Accrual-basis net income

    = Service Performed - Incurred Expenses

    where,

    Service performed is

    = $104,000 - $25,500 + $38,600

    = $117,100

    And, the expenses incurred is

    = $71,700 - $30,400 + $42,900

    = $84,200

    So, the net income under accrual basis is

    = $117,100 - $84,200

    = $32,900
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