Question

Mostert Music Company had the following transaction inMarch:a. Sold instruments to customers for $10,000; received$ 6,000 in cash and the rest on account.The cost of theinstruments was $7,000.
b.Purchased $4,000 of new instruments inventory; paid$1,000 in cash and owed the rest on account.
c. Paid $600 in wages for the month.
d. Received a $200 bill for utilities that will be paidin April.
e. Received $1,000 from customers as deposits on ordersof new instruments to be sold to the customers in April.Complete the following statement:Cash BasisIncomeStatementAccrualBasis Income StatementRevenues:Revenues:CashSales___________Salesto customers_________Customerdeposits___________Expenses:Expenses:Inventorypurchases__________Costof sales__________Wagespaid__________Wagesexpense__________Utilitiesexpense__________CashIncome___________(dbl underline)Netincome_________(dbl underline)

Answer 1

Answer: The answer is given below

Explanation:

It should be noted that for the cash basis income statement, the revenue were cash sales of $6000 and customer deposit of $1000 making a total of $7000. The expenses were the inventory purchased of $1000 and the wages paid of $600 making $1600. Cash income was now:

= $7,000 - $1600

= $5400

For the accrual income statement, the revenue was $10000 and expenses were $7800. The cash Income was now: $10,000 - $7800 = $2,200

Check the attachment for further clarification.