ACCT2110 Financial Accounting Chapter Four Accrual Accounting Homework Problem 1

Question

ACCT2110 Financial Accounting Chapter Four Accrual Accounting Homework Problem 1. Santos Vasq 1. Adjusting entries are necessary only if a company has made accounting errors. 2. The IRS requires companies to file annual tax returns. 3. Accounting periods cannot be shorter than a quarter. 4. One transaction can affect several accounting periods. 5. A time period lasting one year is called an interim period 6. All fiscal years are calendar years, but not all calendar years are fiscal years. Instructions Identify ea uez has prepared the following list of statements about the time period assumption. ch statement as true or false. If false, indicate how to correct the statement. Problem 2. Kerwin Industries collected $140,000 from customers in 2017. Of the amount collected, $35,000 was from revenue earned on account in 2016. In addition, Kerwin carned $45,000 of revenue in 2017, which will not be collected until 2018. Kerwin Industries also paid $85,000 for expenses in 2017. Of the amount paid, s20,000 was for expenses incurred on account in 2016. In addition, Kerwin incurred $26,000 of expenses in 2017, which will not be paid until 2018. Instructions (a) Compute 2017 cash-basis net income. (b) Compute 2017 accrual-basis net income.

Explanation / Answer

Problem 2).

Cash Basis Net Income :-

Accrual Basis Net Income :-

Particulars Amount($) Cash Revenue in 2017:- Cash From Customers 140000 2016's Revenue Receive in 2017 35000 Total Cash Revenue (A) 175000 Cash Expenses in 2017 Expenses Paid in 2017 85000 2016's Expense Paid in 2017 20000 Total Cash Expense (B) 105000 Cash Basis Net Income (A-B) 70000

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