Coronado Corp. maintains its finandial records on the cash basis of accounting.
ID: 2339136 • Letter: C
Question
Coronado Corp. maintains its finandial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Coronado Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2016, 2017, and 2018. 2016 2017 2018 Cash receipts from sales: On 2016 sales On 2017 sales On 2018 sales $268,750 $159,340 $28,810 359,890 94,820 402,8 20 Cash payments for expenses On 2016 expenses On 2017 expenses On 2018 expenses 182,410 72,610 27,110 37,430146,480 53,010 48,240 206,570 Prepayments of 2017 expenses. Prepayments of 2018 expenses. (a) Using the data above, prepare abbreviated income statements for the years 2016 and 2017 on the cash basis. (b) Using the data above, prepare abbreviated income statements for the years 2016 and 2017 on the accrual basisExplanation / Answer
Answer
---Under Cash basis, Revenues and expense are recorded in a period in which they are received or paid in CASH.
Cash Basis
2016
2017
Sales revenue
$ 268,750.00
$ 519,230.00
Expenses
$ 219,840.00
$ 267,330.00
Net Income
$ 48,910.00
$ 251,900.00
--Working
Cash Basis
2016
2017
Sales revenue
268750
=159340+359890
Expenses
=182410+37430
=72610+146480+48240
Net Income
=268750-219840
=519230-267330
---Under Accrual Basis, revenues and expenses for a period are recorded in the period to which they belong whether the Cash has been received or paid or not.
Accrual Basis
2016
2017
Sales Revenue
$ 456,900.00
$ 454,710.00
Expenses
$ 282,130.00
$ 236,920.00
Net Income
$ 174,770.00
$ 217,790.00
---Working
Accrual Basis
2016
2017
Sales Revenue
=268750+159340+28810
=359890+94820
Expenses
=182410+72610+27110
=37430+146480+53010
Net Income
=456900-282130
=454710-236920
Cash Basis
2016
2017
Sales revenue
$ 268,750.00
$ 519,230.00
Expenses
$ 219,840.00
$ 267,330.00
Net Income
$ 48,910.00
$ 251,900.00