Reporting Cash Basis versus Accrual Basis Income
Pavson Sports. Inc., sells sports equipment to customers. Its fiscal year ends on December 31. The following transactions occurred in 2012:
a. Purchased $314,000 of new sports equipment inventory: paid $90.000 in cash and owed the rest on account.
b. Paid employees SI 64.200 in wages for work during the year: an additional $4.800 for 2012 wages will be paid in January 2013.
c. Sold sports equipment to customers for 5630,000: received $520,000 in cash and the rest on account. The cost of the equipment was $387,000.
d. Paid 517,200 cash for utilities for the year.
e. Received 535,000 from customers as deposits on orders of new winter sports equipment to be sold to the customers in January 2013.
f. Received a 51,740 bill for December 2012 utilities that will be paid in January 2013.
Required:
1. Complete the following statements:
Cash Basis Income Statement.
| Accrual Basis Income Statement.
| ||
Revenues |
| Revenues |
|
Cash sales |
| Sales to customers |
|
Customer deposits |
| Expenses |
|
Expenses |
| Cost of sales |
|
Inventory purchases |
| Wages expense |
|
Utilities paid |
|
|
|
Wages paid |
| Utilities expense |
|
Net income | ———— | Net income | ———— |
2. Which basis of accounting (cash or accrual) provides more useful information to investors, creditors, and other users? Why ?
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.