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bekas [8.4K]
3 years ago
9

Al is a medical doctor who conducts his practice as a sole proprietor. During 2017, he received cash of $280,000 for medical ser

vices. Of the amount collected, $40,000 was for services provided in 2016. At the end of 2017, Al had accounts receivable of $60,000, all for services rendered in 2017. In addition, at the end of the year, Al received $12,000 as an advance payment from a health maintenance organization (HMO) for services to be rendered in 2018. Compute Al’s gross income for 2017:
a. Using the cash basis of accounting.
b. Using the accrual basis of accounting.
c. Advise Al on which method of accounting he should use.
Business
1 answer:
brilliants [131]3 years ago
3 0

Answer:

a. Using the cash basis of accounting:

Cash received from customer          $280,000

Cash received for future service      <u>$12,000</u>

Total gross income                            <u>$292,000 </u>

b. Using the accrual basis of accounting:

Service revenue = ($280,000 - $40,000 + 60,000) = $300,000

Gross income                                                                  $300,000

c) AI should use cash accural basis of accounting so that he will not have to pay income taxes on uncollected accounts receivable.

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Disposal of Fixed Asset Equipment acquired on January 6 at a cost of $287,000, has an estimated useful life of 8 years and an es
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Instructions are below.

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