College Accounting, Chapters 1-27
Solutions
College Accounting, Chapters 1-27
LO6 Bill Roberts provided legal advice to a client for $500 on account. Roberts paid a legal assistant $50 for research on this engagement and used office supplies costing $10. If these are the only transactions for the period, compute net income under the cash, accrual, and modified cash bases.
The answers to the Self-Study Test Questions are at the end of the chapter (pages 177–178).
Compute net income under the cash, accrual, and modified cash bases.
Net income:
The bottom line of income statement which is the result of excess of earnings from operations (revenues) over the costs incurred for earning revenues (expenses) is referred to as net income.
Cash basis accounting:
Cash basis accounting is a method of accounting that records revenues only when they are received in cash and records expenses only when the cash is paid.
Modified cash basis accounting:
Modified cash basis accounting is a method of accounting that combine the both the aspects of cash basis and accrual basis. In this method the cash basis is used while recording revenues and most expenses. Exceptions are provided under this accounting when cash is paid for the asset that has a useful life more than one accounting year.
Accrual Cash basis accounting:
Accrual cash basis accounting is a method of accounting that records revenues when they are earned and records expenses when they are incurred...
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