Answer to Question #239231 in Accounting for mafi

Question

Assume that ABC contractor begins an agreement to construct to small bridge for $50000.in January ,ABC begins construction incurs cost of $35000 on credit and by the end of January delivers finished bridge to the owner. In the February ABC collects $50000 cash from the customer. in march ABC pays the $35000 due to the creditor.

Required:-show the net income of each month under cash basis and accrual basis of accounting.

Answer 1

Cash received February $50000

Expense paid march $35000

Revenue earned in Jan

Expenses incurred in Jan

Accrual basis

Net income in Jan = $50000-$35000

$15000

Feb $0

March $0

Cash basis

Net income = revenues- expenses

$50000-$35000

$15000

Jan income $0

Feb $0

March $15000