Question

Current Attempt in Progress Blossom Industries collected $128,100 from customers in 2022. Of the amount collected, $30,500 was for services performed in 2021. In addition, Blossom performed services worth $48,800 in 2022, which will not be collected until 2023. Blossom Industries also paid $87,840 for expenses in 2022. Of the amount paid, $36,600 was for expenses incurred on account in 2021. In addition, Blossom incurred $51,240 of expenses in 2022, which will not be paid until 2023. (a) Compute 2022 cash-basis net income. Cash-basis net income $enter the cash-basis net income in dollars (b) Compute 2022 accrual-basis net income. Accrual-basis net income $enter the accrual-basis net income in dollars

Answer 1

Based on the transactions described, the following are true:

• a. $40,260
• b. $43,920

Cash basis income in 2022

Income in 2022 will be based on all cash amounts received or spent in 2022.

Income = Amount collected - Amount spent on expenses

= 128,100 - 87,840

= $40,260

Accrual basis income in 2022

Here all transactions that occurred in the 2022 financial year will be used in the calculation of net income.

=  Total amount collected in 2022 +  Services performed in 2022 - (Total expenses - 2021 expenses) - Revenue for 2021 - expenses incurred in 2022

= 128,100 + 48,800 - (87,840 - 36,600) - 30,500 -51,240

= $43,920

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