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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).

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College Accounting, Chapters 1-27 ...

22nd Edition
James A. Heintz + 1 other
Publisher: Cengage Learning
ISBN: 9781305666160

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27 ...

22nd Edition
James A. Heintz + 1 other
Publisher: Cengage Learning
ISBN: 9781305666160
Chapter 5, Problem 6CE
Textbook Problem
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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).

To determine

Compute net income under the cash, accrual, and modified cash bases.

Explanation of Solution

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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Chapter 5 Solutions

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
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Ch. 5 - On December 31, the trial balance indicates that...Ch. 5 - LO2 When posting adjusting entries to the general...Ch. 5 - LO3 Indicate the heading for the columns of the...Ch. 5 - LO4 Find the error(s) in the work sheet below.Ch. 5 - LO5 Using the following partial work sheet...Ch. 5 - LO6 Bill Roberts provided legal advice to a client...Ch. 5 - Explain the revenue recognition principle.Ch. 5 - Explain the expense recognition principle.Ch. 5 - Explain the matching principle.Ch. 5 - Explain the historical cost principle.Ch. 5 - Describe a plant asset.Ch. 5 - What is a contra-asset?Ch. 5 - What is the useful life of an asset?Ch. 5 - What is the purpose of depreciation?Ch. 5 - What is an assets depreciable cost?Ch. 5 - What is the book value of an asset?Ch. 5 - Explain the purpose of the work sheet.Ch. 5 - Identify the five major column headings on a work...Ch. 5 - List the five steps taken in preparing a work...Ch. 5 - Describe four tips for finding errors on the work...Ch. 5 - Explain when revenues are recorded under the cash...Ch. 5 - Explain when expenses are recorded under the cash...Ch. 5 - ADJUSTMENT FOR SUPPLIES On December 31, the trial...Ch. 5 - ADJUSTMENT FOR INSURANCE On December 1, a...Ch. 5 - ADJUSTMENT FOR WAGES On December 31, the trial...Ch. 5 - ADJUSTMENT FOR DEPRECIATION OF ASSET On December...Ch. 5 - CALCULATION OF BOOK VALUE On June 1, 20--, a...Ch. 5 - ANALYSIS OF ADJUSTING ENTRY FOR SUPPLIES Analyze...Ch. 5 - ANALYSIS OF ADJUSTING ENTRY FOR INSURANCE Analyze...Ch. 5 - POSTING ADJUSTING ENTRIES Two adjusting entries...Ch. 5 - WORK SHEET AND ADJUSTING ENTRIES A partial work...Ch. 5 - JOURNALIZING ADJUSTING ENTRIES From the...Ch. 5 - EXTENDING ADJUSTED BALANCES TO THE INCOME...Ch. 5 - ANALYSIS OF NET INCOME OR NET LOSS ON THE WORK...Ch. 5 - CASH, MODIFIED CASH, AND ACCRUAL BASES OF...Ch. 5 - ADJUSTMENTS AND WORK SHEET SHOWING NET INCOME The...Ch. 5 - ADJUSTMENTS AND WORK SHEET SHOWING A NET LOSS...Ch. 5 - JOURNALIZE AND POST ADJUSTING ENTRIES FROM THE...Ch. 5 - CORRECTING WORK SHEET WITH ERRORS A beginning...Ch. 5 - ADJUSTMENT FOR SUPPLIES On July 31, the trial...Ch. 5 - ADJUSTMENT FOR INSURANCE On July 1, a six-month...Ch. 5 - ADJUSTMENT FOR WAGES On July 31, the trial balance...Ch. 5 - ADJUSTMENT FOR DEPRECIATION OF ASSET On July 1,...Ch. 5 - CALCULATION OF BOOK VALUE On January 1, 20--, a...Ch. 5 - ANALY SIS OF ADJUSTING ENTRY FOR SUPPLIES Analyze...Ch. 5 - ANALY SIS OF ADJUSTING ENTRY FOR INSURANCE Analyze...Ch. 5 - POSTING ADJUSTING ENTRIES Two adjusting entries...Ch. 5 - WORK SHEET AND ADJUSTING ENTRIES A partial work...Ch. 5 - JOURNALIZING ADJUSTING ENTRIES From the...Ch. 5 - EXTENDING ADJUSTED BALANCES TO THE INCOME...Ch. 5 - ANALYSIS OF NET INCOME OR NET LOSS ON THE WORK...Ch. 5 - CASH, MODIFIED CASH, AND ACCRUAL BASES OF...Ch. 5 - ADJUSTMENTS AND WORK SHEET SHOWING NET INCOME...Ch. 5 - ADJUSTMENTS AND WORK SHEET SHOWING A NET LOSS Val...Ch. 5 - JOURNALIZE AND POST ADJUSTING ENTRIES FROM THE...Ch. 5 - CORRECTING WORK SHEET WITH ERRORS A beginning...Ch. 5 - Delia Alvarez, owner of Delias Lawn Service, wants...Ch. 5 - Kristi Williams offers family counseling services...Ch. 5 - Your friend, Diane Kiefner, teaches elementary...

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