Question

In: Accounting

Grier & Associates maintains its records on the accrual basis. You have been engaged to convert...

Grier & Associates maintains its records on the accrual basis. You have been engaged to convert its income statement to the cash basis. The accrual basis income statement, along with additional information, follows:

Grier & Associates

Income Statement (Accrual Basis)

For the Year Ended December 31, 2020

Sales Revenue $425,000

Expenses:

Salaries and wages $170,000

Income taxes 65,000

Insurance 40,000

Depreciation 15,000

Interest                                  25,000           315,000

Net income   $110,000

Additional information:

       Balances at 12/31                 

     2020                          2019        

Accounts receivable $50,000                     $30,000

Salaries and wages payable 10,000                       20,000

Income taxes payable 24,000                       19,000

Prepaid insurance 8,000                         4,000

Accumulated depreciation 95,000                       80,000

Interest payable 3,000                         9,000

No plant assets were sold during 2020.

What is cash basis net income? $__________

Solutions

Expert Solution

Cash flow from Operating Activities
Net Income $       1,10,000
Adjustments
Depreciation $            15,000
Increase in Accounts Receivable $          -20,000
Increase in Prepaid Insurance $            -4,000
Decrease in Salaries and Wages Payable $          -10,000
Decrease in Interest payable $            -6,000
Increase in Income Tax Payable $              5,000
Total Adjustments $        -20,000
Net Cash from operating activities $            90,000


Cash basis net income = $90000


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