Textbook Problem

Brief Exercise 3-29

Revenue and Expense Recognition

Lauhl Corporation provides janitorial services to several Office buildings. During April, Lauhl engaged in the following transactions:

1. On April 1, Lauhl received from Metro Corporation to provide cleaning services over the next 6 months.
2. On April 5, Lauhl purchased and received S8,500 of supplies on credit from Eagle Supply Company. During the month, Lauhl paid $5,000 to Eagle and used Sl,300 of the supplies.
3. On April 20, Lauhl performed one-time cleaning services of $2,500 for Jones Company. Jones paid Lauhl the full amount on May 10.
4. On April 30, Lauhl paid employees wages of $3,400. An additional $850 was owed to employees for work performed in April.

Required:

Calculate the amount of net income that Lauhl should recognize in April under (1) cash-basis accounting and (2) accrual-basis accounting.