14. The following is selected information from J Corporation for the fiscal year

ID: 2431413 • Letter: 1

Question

14. The following is selected information from J Corporation for the fiscal year ending October 31, 2008.

Cash received from customers $300,000

Revenue earned 380,000

Cash paid for expenses 170,000

Cash paid for computers on November 1, 2007 that will be used

for 3 years (annual depreciation is $16,000) 48,000

Expenses incurred, not including any depreciation 200,000

Proceeds from a bank loan, part of which was used to pay for

the computers 100,000

Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2008?

Use the following information for questions 15–16.

Sheepskin Company had the following transactions during 2008.

Sales of $5,500 on account

Collected $2,225 for services to be performed in 2009

Paid $600 cash in salaries

Purchased airline tickets for $255 in December for a trip to take place in 2009

15. What is Sheepskin’s 2008 net income using accrual accounting?

a. $3,875

b. $5,875

c. $4,900

d. $3,625

16. What is Sheepskin’s 2008 net income using cash basis accounting?

Explanation / Answer

Answers

Revenues earned

$ 380,000.00

Expenses incurred

$ (200,000.00)

Depreciation expense

$ (16,000.00)

Net Income based on accrual basis

$ 164,000.00

Sales revenue

$ 5,500.00

Salaries expenses

$ (600.00)

Net Income using Accrual accounting

$ 4,900.00

Sales revenue

$ 2,225.00

Salaries expenses

$ (600.00)

Tickets purchased

$ (225.00)

Net Income using Cash basis accounting

$ 1,400.00