Question

Rebel Technology maintains its records using cash-basis accounting. During the year, the company received cash from customers, $43,000, and paid cash for salaries, $23,500. At the beginning of the year, customers owe Rebel $1,000. By the end of the year, customers owe $6,600. At the beginning of the year, Rebel owes salaries of $5,600. At the end of the year, Rebel owes salaries of $3,300. Determine cash-basis net income and accrual-basis net income for the year.

Answer 1

Answer:

The cash-basis net income and accrual-basis net income for the year is $19,500 and $22,800 respectively.

Explanation:

The computation is shown below:

1. Net income under cash basis:

= Received cash from customers - paid cash for salaries

= $43,000 - $23,500

= $19,500

2. Net income under accrual basis:

= Cash received - salary paid

where,

Cash received = Cash owed at the end of the year + cash received - cash owed at the beginning of the year

= $6,600 + $43,000 - $1,000

= $48,600

And, the salary paid = salary owed at the end of the year + salary paid - salary owed at the beginning of the year

= $5,600 + $23,500 - $3,300

= $25,800

Now put these values to the above formula  

So, the value would equal to

= $48,600 - $25,800

= $22,800