Question

Martin Sharp, who repairs lawn mowers, collects cash from his customers when the repair services are completed. He maintains an inventory of repair parts that are purchased from a wholesale supplier. Martin’s records show the following information for the first three months of 2011.
Required:
1. Ignoring expenses other than repair parts, calculate net income for each of the three months on a cash basis.
2. Ignoring expenses other than repair parts, calculate net income for each of the three months on an accrual basis.
3. Why do decision-makers prefer the accrual basis of accounting?


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  • CreatedSeptember 22, 2015
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