Answered: YinYang Company reported cash basis of…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 1MCQ: Which of the following statements is true? Under cash-basis accounting, revenues are recorded when a...

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Question

YinYang Company reported cash basis of income other than sales of P 50,000 for rent and P18,000 for interest for 2021. The entity would have to convert records and statements to accrual basis again for 2021.

It was ascertained in the accrual basis statements made for December 31,2020 that unearned rent amounted to P 20,000 and accrued interest amounted to P 8,000.

Upon further checking of records, it was determined that the unearned rent at the end of 2021 amounts to P 15,000 and accrued interest at the end of 2021 amounts to P 6,000.

Compute for the accrual basis of income other than sales related to rent and interest for 2021 that will be presented in the December 31, 2021 Statement of Comprehensive Income.

To achieve the conversion from cash basis to accrual basis of accounting the formula
for Income other than Sales can be:
INCOME OTHER THAN SALES
Income received – cash basis
XX
Add: Deferred income- beginning
XX
Accrued income- end
XX
Total
XX
Less: Deferred income- ending
Accrued income- beginning
XX
XX
Income for the current year- accrual basis
XX

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