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In its first year of operations, Harden Co. earned $39,000 in revenues and received $33,000 cash from these customers. The company incurred expenses of $22,500 but had not paid $2,250 of them at year-end. Harden also prepaid $3,750 cash for expenses that would be incurred the next year. Calculate the first years net income under both the cash basis and the accrual basis of accounting.

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    Janet Jul 10, 2010

    Yes, thank you so much.

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Cash Basis =
Cash in 33,000- cash out 20250(expenses22500-not paid 2250)=102750
Accrual Basis=
Revenue 39000 (Revenue is cash+AR)-incurred expenses 22500 (regardless if paid)=16500

Thank you,
Lee

Posted on Jul 09, 2010

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