a. Mike paid Hank $320 in cash in December of this year and promised to pay the remaining $540 with interest in three months.
Gross income=
b. Mike gave Hank tickets in December to the big game in January. The tickets have a face value of $50 but Hank could sell them for $760. Hank went to the game with his son.
Gross income=
c. Mike bought Hank a new set of snow tires. The tires typically sell for $860, but Mike bought them on sale for $774.
Gross income=
Homework Answers
Cash basis accounting is an accounting system that recognizes revenues and expenses only when cash is exchanged.
a. Gross Income = $320 (cash received in December)
b. Gross Income = Zero. Non Cash Transaction (As cash exchange has not taken place, tickets are non cash items)
c. Gross Income = Zero. Non Cash Transaction (As cash exchange has not taken place, snow tires are non cash items)
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