Molly's Auto Detailers maintains its records on the cash basis. During 2018, Molly's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Molly's accrual basis net income was:

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Business

Maddox Hamilton

2 September, 06:54

Molly's Auto Detailers maintains its records on the cash basis. During 2018, Molly's collected $72,000 from customers and paid $21,000 in expenses. Depreciation expense of $5,000 would have been recorded on the accrual basis. Over the course of the year, accounts receivable increased $4,000, prepaid expenses decreased $2,000, and accrued liabilities decreased $1,000. Molly's accrual basis net income was:

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Omar Leblanc · Answer 1

Answer: $49,000

Explanation:

Total Revenue:

= cash revenue + increase In accounts receivables + decrease in accrued liability

= $72,000 + $4,000 + $1,000

= $77,000

Net income accrual method:

= Total Revenue - cash expenses - depreciation expense - decrease in prepaid expenses

= $77,000 - $21,000 - $5,000 - $2,000

= $49,000