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How to calculate Accrual and Cash basis net income?

Asked by: megan 5190 views YA Discussion

Conan Industries collected $ 100,000 from customers in 2010. Of the amount collected, $ 25,000 was from revenue earned on account in 2009. In addition, Conan earned $ 40,000 of revenue in 2010, which will not be collected until 2011.

Conan 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

Asked: poorcollegestudent2008

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  1. Old Guy on May 19, 2011 Reply

    Cash Basis:
    Revenue 100,000
    Expenses (70,000)

    Net Income 30,000

    Accrual Basis:
    Revenue 100,000-25,000+40,000=115,000
    Expenses 70,000-30000+42000=82,000

    Net Income 33,000

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