answer point E3-3 abies would have to be booked, and the federal deficit would i
ID: 2335024 • Letter: A
Question
answer point E3-3
abies would have to be booked, and the federal deficit would increase so 2 Inst a) What is the difference betweern erence between accrual-basis accounting and cash-basis accounting? bi Why would politicians prefer the cash basis over the accrual basis? ic) Write a letter to your senator explaining why the federal government should adopt the accrual basis of accounting. E3-3 Conan Industries collected $100.000 from customers in 2010. Of the amount collected, Compute cash and acc S25.000 was from revenue earned on account in 2009. In addition, Conan earned $40,000 of rev- accounting income in 2010, which will not be collected until 2011. (so 2) 4Conan Industries also paid $70,000 for expenses in 2010. Of the amount paid, $30,000 was for expenses incurred on account in 2009. In addition, Conan incurred $42,000 of expenses in 2010, which will not be paid until 2011. Instructions (a) Compute 2010 cash-basis net income. (b) Compute 2010 accrual-basis net income Identify the type of ad entry needed (SO 4) E3-4 Emeril Corporation encounters the following situations: I. Emeril collects $1,000 from a customer in 2010 for services to be performed in 2011 2. Em 3. eril incurs utility expense which is not yet paid in cash or recorded. Emeril's employees worked 3 days in 2010, but will not be paid until 2011. 4. Emeril earned service revenue but has not yet received cash or recorded the transaction. Dogamher 1 for the 4 months starting December 1.Explanation / Answer
Solution E 3-3
(a) 2010 cash basis net income = cash received from customers - cash paid for expenses
= $100,000 - $70,000 = $30,000
(b)2010 Accrual Basis net income = Revenue earned in 2010 - Expenses incurred related to 2010
= ($100,000 -$25,000 + $40,000) - ($70,000 - $30,000 + $42,000)
= $115,000 - $82,000
= $33,000
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