Complete question :
In its first year of operations, Roma Company reports the following. Earned revenues of $53,000 ($45,000 cash received from customers). Incurred expenses of $29,500 ($23,050 cash paid toward them). Prepaid $8,750 cash for costs that will not be expensed until next year. calculate the first year's net income under both the cash basis and the accrual basis of accounting.
Answer:
Kindly check explanation
Step-by-step explanation:
Given the following :
Earned revenue = $53,000
Cash received from customers = $45000
Incurred expenses = $29,500
Cash paid towards incurred expenses = $23,050
Cash which will not be expensed till next year = $8,750
Cash Accounting:
Cash received $45,000
Expenses ($23,050 + $8750) = $31,800
Net Income $(45,000 - 31,800) = $13,200
Accrual Accounting :
Revenue earned $53,000
Expenses incurred $29,500
Net income $(53,000 - 29,500) = $23500