Answer to Question #239240 in Accounting for mafi

Question

assume that during the year of 2020, XYZ co. collected $400000from its customer and paid $180000 for operating expense, resulting in cash basis net income of $220000. The other information are as follows 

.Accrued liability on January 1,2020 is $6000 and Dec 31,2020 is 9500.

.Account receivable on January 1,2020 is 16000 and Dec 31,2020 is 13000.

.Prepaid expense on January 1,2020 is 2800 and Dec 31,2020 is 6700.

.un earned service revenue on January 1,2020 is 400 and Dec 31,2020 is 8000.

Required :- based on the above information 

A. Compute revenue on accrual basis 

B. Compute expense on accrual basis 

C. Show the conversion from cash basis to accrual basis

Answer 1

Solution

a) Accrued revenue=cash collected+change in receivable balance-change in unearned revenue
 =400000+(13000-16000)-(8000-400)
 =389400

b)Accrued expense=cash paid+change in accrued liability-change in prepaid expenses

=180000+(9500-6000)-(6700-2800)

=179600

c)Conversion from cash basis to accrual basis

Cash net icome                              220000
Less ; Decrease in Accounts Receivable       (3000)
       Increase in unearned revenue          (7600)
       Increase in accrued liability         (3500)
Add  ; Increase in Prepaid expense            3900
       Accrual based Income                 209800