A company maintains its records using cash-basis accounting. During the year, th

Question

A company maintains its records using cash-basis accounting. During the year, the company received cash from customers, $38,000, and paid cash for taxes, $28,000. At the beginning of the year, customers owe the company $3,300. By the end of the year, customers owe $5,100. At the beginning of the year, the company taxes of $3,200. At the end of the year, the company owes taxes of $5,.200 Determine cash-basis net income and accrual-basis net income for the year Net Income Cash-basis net income Accrual-basis net income Exercise Diiulty, 3 Hard L Learning Objective: 03-02 Distinguish 0 OOO F4 F2 F3 FS 2 3 4 a W E

Explanation / Answer

1. Cash Basis Net Income=Total Recipts-Total payments

=$38000-$28000=$10000

2. Accural Basis Net Income=Total Accured Income-Total Accured Expenses

=$39800( W.N. 1)-$30000(W.N. 2)=$9800

Working note 1. Total Accured Income=Total income received during the year + customers owes at the end of year-customers owes at the begining of the year

=$38000+$5100-$3300=$39800

Working note 2. Total Accured Expenses=Total Expenses paid during the year + Taxes owes at the end of year-taxes owes at the begining of the year

=$28000+$5200-$3200=$30000

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