Question

basix Grier & Associates maintains its records on the cash basis. You have been engaged to convert its cash basis income statement to the accrual basis. The cash basis, income statement, along with additional information, follows: Grier & Associates Income Statement (Cash Basis) For the Year Ended December 31, 2015 $450,000 Cash receipts from customers Cash payments: Salaries and wages Taxes Insurance Interest Net income $150,000 75,000 40,000 25.000 290,000 $160.000 Additional information: Accounts receivable Salaries and wages payable Taxes payable Prepaid insurance Accumulated depreciation Interest payable Balances at 12/31 2015 2014 $50,000 $40,000 10,000 20,000 14,000 19,000 8,000 4,000 90,000 75,000 3,000 9,000 No plant assets were sold during 2015,

Answer 1

Sol :

Income Statement for the year ended 31.12.2015

Sales made during the year (Cash + Credit) $450,000-$40000+$50000 =$460,000

Less :

Salaries & Wages $150,000-$20000+$10000 =$140,000

Taxes $75,000-$19,000+$14,000 =$70,000

Insurance $40,000+$4,000-$8,000 =$36,000

Interest $25,000-$9000+$3000 =$19,000

Depreciation $90000-$75000 =$15,000

Net Income =$180,000

Note :

Payables as on opening date are related to previous year to be reduced from cash paid in current year and add the current year payables.