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mart [117]
3 years ago
13

Hibiscus Corporation began operations on January 1, Year 1. On December 15, Year 1, the company received a payment in the amount

of $12,000 from a customer that covers landscaping services to be performed during the months of April, May, and June of Year 2. The company uses the cash basis. How much landscaping revenue will be reported on the company's income statement for the year ended December 31, Year 1?
Business
1 answer:
mars1129 [50]3 years ago
4 0

Answer:

$12,000

Explanation:

The main difference between cash basis accounting and accrual accounting is that accrual accounting recognizes revenue only after the earning process is completed. On the other hand, cash basis accounting recognizes revenue and expenses when the money is received or paid, regardless of when the service is provided. This is why the US GAAP doesn't allow cash basis accounting.

The IRS allows cash basis accounting for individuals and small businesses that only deal with cash payments, but they must meet certain criteria:

  • partnerships or C corporations with less than $5 million in yearly revenue
  • sole proprietorships and S corporations with less than $1 million in yearly revenues
  • family owned farms
  • you provide personal services and 95% of your revenue comes from it
  • no publicly traded corporation is allowed

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On September 11, 2016, Home Store sells a mower for $450 with a one-year warranty that covers parts. Warranty expense is estimat
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Answer:

Date      Accounts Titles and Explanations     Debit        Credit  

Sept, 11           Cash                                             $450  

2016         Sales                                                               $450  

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Sept, 11        Warranty Expenses                         $40.50  

2016              ($450 x 9%)

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                 (To record the Warranty Expenses)    

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2017             Repairs Parts Inventory                                       $32

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