Intermediate Accounting Net Income

kristella · #1 Sep 12, 2007, 01:10 PM

Can someone please help me with this one?

On March 1, 2006, you invest $20,000 of your own money into a new business. You also borrow $8,000 at 8% annual interest rate. You purchase $5000 of supplies on account and put $7,000 down on equipment costing $16,000, financing the balance, interest free. The depreciation on the equipment is straight-line, over 5 years. You receive $3,000 prepayment for services to be completed in the future, of which 80% is completed by the end of the year. You receive an additional $2,000 cash for work completed throughout the year. You incur $3,000 of operating expenses, of which $1,000 is still owed at years end. At years end, you have $2,000 of supplies remaining, and the payable balance for the supplies is $500. The balance owed on the equipment is $1,300. Using this information calculate the 1) accrual basis net income and 2) the cash basis net income?

Thanks!!!

kristella · Sep 13, 2007, 12:10 PM

Quote:

Originally Posted by kristella

Can someone please help me with this one?

On March 1, 2006, you invest $20,000 of your own money into a new business. You also borrow $8,000 at 8% annual interest rate. You purchase $5000 of supplies on account and put $7,000 down on equipment costing $16,000, financing the balance, interest free. The depreciation on the equipment is straight-line, over 5 years. You receive $3,000 prepayment for services to be completed in the future, of which 80% is completed by the end of the year. You receive an additional $2,000 cash for work completed throughout the year. You incur $3,000 of operating expenses, of which $1,000 is still owed at years end. At years end, you have $2,000 of supplies remaining, and the payable balance for the supplies is $500. The balance owed on the equipment is $1,300. Using this information calculate the 1) accrual basis net income and 2) the cash basis net income?

Thanks!!!

Nevermind. I figured it out!