In its first year of operations, roma co. earned $45,000 in revenues and received $37,000 cash from these customers. the company incurred expenses of $25,500 but had not paid $5,250 of them at year-end. the company also prepaid $6,750 cash for costs that will not be expensed until the next year. calculate the first year's net income under both the cash basis and the accrual basis of accounting.

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Business

Nayeli Wong

15 March, 02:43

In its first year of operations, roma co. earned $45,000 in revenues and received $37,000 cash from these customers. the company incurred expenses of $25,500 but had not paid $5,250 of them at year-end. the company also prepaid $6,750 cash for costs that will not be expensed until the next year. calculate the first year's net income under both the cash basis and the accrual basis of accounting.

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Rocketfuel · Answer 1

Here you go,

Cash Accounting

Revenues (cash receipts) ... $37,000

Expenses ($25,000-$5,250+$6,750) ... $27,000

Net income ... $10,000

Accrual Accounting

Revenues (earned) ... $45,000

Expenses (incurred) ... $25,500

Net Income ... $19,500