03. Cash & Accrual Basis PDF

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Cash Basis Versus Accrual BasisAccrual Basis VS. Cash Basis – Income Statement Numbers 1 and 2 Gerald Company had the following account balances for 2021. December 31 January 1 Accounts payable 500,000 650, Inventory 300,000 250, Accounts receivable 800,000 900, Prepaid expenses 400,000 600, All sal...

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Cash Basis Versus Accrual Basis Accrual Basis VS. Cash Basis – Income Statement Numbers 1 and 2 Gerald Company had the following account balances for 2021. December 31 500,000 300,000 800,000 400,000

Accounts payable Inventory Accounts receivable Prepaid expenses • • •

January 1 650,000 250,000 900,000 600,000

All sales and purchases of inventory were on account. Depreciation expense of P900,000 was recognized during 2021. Equipment was sold during 2021 and a gain of P300,000 was recognized.

The entity provided the following cash flow information for 2021: Cash collected from customers Cash paid to suppliers Cash paid for other expenses

9,500,000 4,100,000 1,400,000

1) What is the net income under accrual basis? A. 3,900,000 B. 3,000,000 C. 3,300,000 D. 4,000,000 2) What is the net income under cash basis? A. 3,400,000 B. 4,050,000 C. 4,000,000 D. 3,450,000 Cash Basis To Accrual Basis – Single Account Numbers 3, 4 and 5 Kinesis Company paid or collected during 2021 the following items: Insurance premiums paid Salaries paid Interest collected

25,450 116,300 53,750

The following balances were from Kinesis Company’s balance sheets: Prepaid insurance Interest receivable Salaries payable 3) The insurance expense on the income statement for 2021 was A. 26,150 B. 25,750 C. 24,750 D. 23,750 4) The interest revenue on the income statement for 2021 was A. 55,250 B. 53,750 C. 52,250 D. 50,550 5) The salary expense on the income statement for 2021 was A. 118,000 B. 116,300 C. 114,600 D. 105,700

December 31, 2020 2,400 4,700 12,300

December 31, 2021 1,700 3,200 10,600

Accrual Basis To Cash Basis – Single Account Number 6, 7 and 8 Martyr Company paid or collected during 2021 the following items: Interest revenue Insurance expense Salaries expense

75,500 9,600 65,000

The following balances were from Martyr Company’s balance sheets:

Interest receivable Salaries payable Prepaid insurance

December 31, 2021 7,500 4,200 1,500

December 31, 2020 9,100 8,900 1,100

6) The cash received for interest during 2021 was A. 77,100 B. 75,500 C. 73,900 D. 66,400 7) The cash paid for salaries during 2021 was A. 73,900 B. 69,700 C. 60,800 D. 60,300 8) The cash paid for insurance premiums during 2021 was A. 10,000 B. 9,200 C. 8,500 D. 8,100 Accrual Basis To Cash Basis – Dual Account, Income 9) Under the accrual basis, rental income of Lion’s Pride Company for the current calendar year is P60,000. Additional information regarding rental income are: Accrued rental income, December 31 Accrued rental income, January 1 Unearned rental income, December 31 Unearned rental income, January 1

4,000 3,000 7,500 5,000

How much actual cash rental was received by Lion’s Price Company in the current year? A. 65,500 B. 62,500 C. 61,500 D. 58,500 Cash Basis To Accrual Basis – Dual Account, Other Income 10) Time of Babe Co. has the following information: Accrued rent income – January 1 Accrued rent income – December 31 Unearned rent – January 1 Unearned rent – December 31 Rental payments received How much is the rent income under accrual basis of accounting? A. 4,000,000 B. 2,400,000 C. 5,600,000 D. 4,800,000

1,600,000 800,000 1,200,000 2,000,000 4,000,000...