Rebel Technology maintains its records using cash-basis accounting. During the year, the company received cash from customers, $43,000, and paid cash for salaries, $23,500. At the beginning of the year, customers owe Rebel $1,000. By the end of the year, customers owe $6,600. At the beginning of the year, Rebel owes salaries of $5,600. At the end of the year, Rebel owes salaries of $3,300. Determine cash-basis net income and accrual-basis net income for the year.

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01-10-2019
Business

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Rebel Technology maintains its records using cash-basis accounting. During the year, the company received cash from customers, $43,000, and paid cash for salaries, $23,500. At the beginning of the year, customers owe Rebel $1,000. By the end of the year, customers owe $6,600. At the beginning of the year, Rebel owes salaries of $5,600. At the end of the year, Rebel owes salaries of $3,300. Determine cash-basis net income and accrual-basis net income for the year.

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andromache andromache · Answer 1 · 2019-10-03T11:33:25+02:00

Answer:

The cash-basis net income and accrual-basis net income for the year is $19,500 and $22,800 respectively.

Explanation:

The computation is shown below:

1. Net income under cash basis:

= Received cash from customers - paid cash for salaries

= $43,000 - $23,500

= $19,500

2. Net income under accrual basis:

= Cash received - salary paid

where,

Cash received = Cash owed at the end of the year + cash received - cash owed at the beginning of the year

= $6,600 + $43,000 - $1,000

= $48,600

And, the salary paid = salary owed at the end of the year + salary paid - salary owed at the beginning of the year

= $5,600 + $23,500 - $3,300

= $25,800

Now put these values to the above formula

So, the value would equal to

= $48,600 - $25,800

= $22,800

Tundexi Tundexi · Answer 2 · 2021-09-03T19:38:55+02:00

1. Cash basis in as accounting method that recognizes revenues and expenses only when the cash is received or paid out.

Net income under cash basis = Received cash from customers - Cash paid for salaries

Net income under cash basis = $43,000 - $23,500

Net income under cash basis = $19,500

2. Accrual basis is as accounting method where accounting transactions are recorded for revenue when earned and expenses when incurred.

Net income under accrual basis = Cash received - Salary paid

Net income under accrual basis = (Cash owed at the end of the year + Cash received - Cash owed at the beginning of the year) - (Salary owed at the end of the year + Salary paid - Salary owed at the beginning of the year)

Net income under accrual basis = ($6,600 + $43,000 - $1,000) - ($5,600 + $23,500 - $3,300)

Net income under accrual basis = $48,600 - $25,80

Net income under accrual basis = $22,800

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