Wildhorse Industries collected $117,600 from customers in 2022.
Of the amount collected, $28,000 was for services performed in
2021. In addition, Wildhorse performed services worth $44,800 in
2022, which will not be collected until 2023.
Wildhorse Industries also paid $80,640 for expenses in 2022. Of the
amount paid, $33,600 was for expenses incurred on account in 2021.
In addition, Wildhorse incurred $47,040 of expenses in 2022, which
will not be paid until 2023
.
(a) Computation of Cash Basis Net Income in 2022:
Cash Basis Net Income in 2022 = Total Cash Received in Year 2022 - Total Cash Paid in Year 2022
Cash Basis Net Income in 2022 = $117,600 - $80,640 = $36,960
(b) Computation of Accrual Basis Net Income in 2022:
Accrual Basis Net Income in 2022 = Total Amount of services peformed in Year 2022 - Total Amount of expenses incurred in Year 2022
Total Amount of services peformed in Year 2022 = Total Amount collected in Year 2022 - Amount collected in lieu of services performed in Year 2021 + Services performed in Year 2022 for which cash has not been received
Total Amount of services peformed in Year 2022 = $117,600 - $28,000 + $44,800 = $134,400
Total Amount of Expense incuured in Year 2022 = Total Amount paid in Year 2022 - Amount paid in lieu of expense incurred in Year 2021 + Expense incurred in Year 2022 for which cash has not been paid
Total Amount of Expense incuured in Year 2022 = $80,640 - $33,600 + $47,040 = $94,080
Therefore, Accrual Basis Net Income in 2022 = $134,400 - $94,080 = $40,320
Wildhorse Industries collected $117,600 from customers in 2022. Of the amount collected, $28,000 was for services...
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