A company maintains its records using cash-basis accounting. During the year, the company received cash from customers, $32,000, and paid cash for salaries, $24,000. At the beginning of the year, customers owe the company $3,000. By the end of the year, customers owe $5,500. At the beginning of the year, the company owes salaries of $3,100. At the end of the year, the company owes salaries of $5,700. Determine cash-basis net income and accrual-basis net income for the year.

net income cash-basis 8,000

income accrual-basis 7,900

Explanation:

cash revenues 32,000

salaries expense (24,000)

net income cash-basis 8,000

sales for the period:

beginning AR + sales - collected = ending AR

3,000 + sales - 32,000 = 5,500

sales = 34,500

salaries expense:

beginning salaries payables + salaries - paid = ending salaries payable

3,100 + salaries - 24,000 = 5,700

salaries 26,600

revenues 34,500

salaries (26,600)

income accrual-basis 7,900

Cash-basis net income: $8,000

Accrual-basis net income: $7,900

Explanation:

A company maintains its records using cash-basis accounting. During the year, the company received cash from customers, $32,000, and paid cash for salaries, $24,000. At the beginning of the year, customers owe the company $3,000. By the end of the year, customers owe $5,500. At the beginning of the year, the company owes salaries of $3,100. At the end of the year, the company owes salaries of $5,700. Therefore, the Cash-basis net income is $8,000 and the Accrual-basis net income is $7,900.