Question

Mike's Company operations for the month of July are summarized as follows:

1. Provided $7,400 of services on account.
2. Received $3,800 cash from customers for services provided in July.
3. Received $1,300 cash for services to be provided in August.
4. Received $4,100 cash from customers on account for services provided in June.
5. Paid June’s warehouse rental bill on account in the amount of $1,400.
6. Received July’s warehouse rental bill of $1,500; set it aside to be recorded at a later date.

Required:

1. Determine the net income for July using the cash basis of accounting. (The answer for this question is $7,800). We add lines B,C, and D)

      b. Determine the net income for July using the accrual basis of accounting. (The answers of this part are not $6,000, $5,900, or $6,400. Please show me how you get the answer to this question in detail.)

Answer 1

a. Net Income Under Cash Basis: Cash Collection from customers for service-July (B) $3,800.00 Cash Collection from customers for service to be provided(C') $1,300.00 Cash Collection from Customer - June (D) $4,100.00 Total Collections $9,200.00 Less: Payments: Rental Bill paid - June (E) $1,400.00 Net Income $7,800.00 b. Net Income Under Accrual Basis: Service Provided on Account (A) Service provided for cash - July (B) Total Revenue Less: Expenses: Accrued Rental Expense (F) $7,400.00 $3,800.00 $11,200.00 -$1,500.00 Net Income $9,700.00