Question: Carmen opens a retail store. Her sales during the first year are $600,000, of which $30,000 has not been collected a year-end. Her purchases are

Carmen opens a retail store. Her sales during the first year are $600,000, of which $30,000 has not been collected a year-end. Her purchases are $400,000. She still owes $20,000 to her suppliers, and at year-end she has $50,000 of inventory on hand. She incurred operating expenses of $160,000. At year-end she has not paid $15,000 of the expenses.

A. Compute her net income from the business assuming she elects the accrual method.

B. Compute her net income from the business assuming she elects the cash method.

C. Would paying the $15,000 she owes for operating expenses before year-end change her net income under accrual method of reporting? Under the cash method?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

To tackle the problem effectively we need to first understand the difference between the accrual method and the cash method of accounting The accrual ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!

Carmen opens a retail store. Her sales during the first year are $600,000, of which $30,000 has not been collected at year-end. Her purchases are $400,000. She still owes $20,000 to her suppliers,...

During the first year of operations, Benjis Health Club had the following transactions pertaining to its common stock : Jan. 8 Issued 50,000 shares for cash at $10 per share. Aug. 1 Issued 25,000...

Chelsea opens a retail store. Her sales during the first year are $700,000, of which $60,000 has not been collected at year-end. Her purchases are $550,000. She still owes $40,000 to her suppliers,...

Chloe opens a retail store. Her sales during the first year are $700,000, of which $90,000 has not been collected at year-end. Her purchases are $550,000. She still owe $60,000 to her suppliers, and...

Cathy opens a retail store. Her sales during the first year are $ 850,000?, of which $ 80,000 has not been collected at? year-end. Her purchases are $ 500000. She still owes $ 15000 to her?...

Cindy opens a retail store. Her sales during the year are $550,000, of which $60,000 has not been collected at year end. Her purchases are $320,000. She still owes $45,000 to her Suppliers, and at...

I'm in serious need of help in my accounting class (acc205) . I'm falling behind and I need help with this weeks assignment. for week three for the may-june month . can someone please help me ....

1. (Points: 1) The primary purpose of hiring a public accounting firm to examine the financial statements of the company is a. to assure no fraud has been committed by the company's management b. to...

Read the article Current Multinational Financial Challenges and answer the question: Many experts argue that when the government of US bails out a private financial institution it creates a problem...

TLUS (a) The truck shown in Figure 3 (a) is traveling at 90 km/h when the driver applies the brakes to come to stop. The deceleration of the truck is constant and the truck comes to a complete stop...

value; higher heating tion of a stoichiometric propane-air mixture assuming reactants at 298 K, Determine the adiabatic flame temperature for constant-pressure combus no dissociation of the products,...

Now or Never! specializes in "one day - one deal" selling. Every day they sell a product that isnot available the next day. If the item sells out, all the excess demand is lost and if items are...

Question: Transfer function of a complex control system is given below. T(s): = 30s + 3s + s s6+3s5+4s + 6s + 5s +3s+2 a) Observe system's stability according to coefficient tests and mention your...

11. [10] The stochastic exponential of a constant, that is, the process & defined by Et = exp xp (aB - 1/2), t for some constant a, is a martingale. a. Prove the above statement directly, that is, by...

what is a example of a business making a financing decision?

The following processes constitute the air-standard Diesel cycle: 12: isentropic compression,23: constant-volume energy addition (T and P increase),34: constant-pressure energy addition (v...

Identify a local franchise in your area, and determine where the competitors are located and where other franchises from the same organization are located. Evaluate the existing potential for the...

At the beginning of 2015, Silver Corporation has a $95,000 capital loss carryforward from 2014. During 2015, the corporation sells land, held for four years, and realizes an $80,000 gain. Silver has...

P Corporation uses the calendar year as its tax year and the accrual method as its overall accounting method. S Corporation uses a fiscal year ending June 30 as its tax year and the cash method as...

Which of the following corporate forms are exempt from the PHC tax? The accumulated earnings tax? a. Closely held corporations b. S corporations c. Professional corporations d. Tax-exempt...

Explain the assumption behind negotiation in which people try to minimize their losses and maximize their gains.

Explain how anger can negatively affect a conflict situation.

List ways to effectively control your anger and express it in constructive ways.