1. Beta Retail Store

Scenario: Modified Cash Basis Accounting

Data: Beta Retail Store uses the modified cash basis of accounting. During the year, the following transactions occurred:

• Cash sales: $200,000
• Credit sales: $100,000
• Cash received from credit sales: $80,000
• Inventory purchases on credit: $50,000

Requirements:

1. Prepare Beta Retail Store's income statement using the modified cash basis of accounting.
2. Calculate Beta Retail Store's net cash flow from operating activities under the modified cash basis.
3. Discuss the differences between modified cash basis and accrual basis accounting for recognizing revenue and expenses.
4. Analyze how the modified cash basis affects Beta Retail Store's financial reporting compared to cash basis accounting.
5. Evaluate the impact of credit sales and inventory purchases on Beta Retail Store's cash flow and profitability.
6. Recommend strategies to improve Beta Retail Store's cash management under the modified cash basis of accounting.