Question

What is answer to question C?

homework1-2019- Saved to my Mac a Search in Document Home Insert Draw Design Layout References Mailings Review View iCloud Storage is Almost Full Upprado your storage to keep using Cloud Upgrade Times New v 12 v A"A" Aa v Ap -v-v-v -- 2+ Not Now Styles Emphasis Heading 1 Strong Subtit No SpscingSube E Cash vs. Accrual Accounting 1. Consider the amount and timing of the following transactions made by IM. Farmer a.Novcmber 2018 Purchased, paid for and applied fertilizer for the 2019 grain crop. S38,000. b. March 2019 Purchased and paid for seed, chemicals, fuel, other variable costs. S65,000. c. October 2019 Purchased and charged to account fuel for drying. S4,000. d. November 2019 Part of grain sold for $72,000. Rest placed in storage, valued at S70,000. e. December 31, 2019 Accrued interest totals $1,200. f January 2020 Paid bill for fuel used to dry grain. $4,000. g. January 2020 Paid accrued interest, $1,200. h. May 2020 Remaining 2014 grain sold. $65,000. A) What is the 2019 profit under cash accounting? (Show work) B) What is the 2019 profit under accrual accounting? (Show work.) C) Which system is the most accurate reflection of actual farm profit? Why? Page 1 of 1 155 words English { United States) Focus 120%

Answer 1

ANSWER-C)

The accrual based provides more accurate picture of profits in the farm business. The profits as computed above are different under both methods. The accrual based accounting, revenues and expenses are recorded when they are earned, regardless of when the money is actually paid or received; thus provides the true profitability in the farm business thus is more preferable

	Impact in 2019
	Cash Based	Accrual Based
Nov-18	Nil	-38,000
Mar-19	-65,000	-65,000
Oct-19	Nil	-4,000
Nov-19	72,000	70,000
Dec-19	Nil	1,200
Jan-20	Nil	-4,000
Jan-20	Nil	-1,200
May-20	Nil	65,000
	7,000	24,000