Acompany’s cash-basis net income for the year ended december 31 was $75,000. the following information is from the company’s accounting records:
january 1 december 31
accounts receivable $15,000 $20,000
prepaid expenses 7,000 4,000
accrued liabilities 2,500 2,000
what is the accrual-basis net income?
$72,500
$75,000
$77,500
$83,500

The accrual-basis net income is $77,500.

Explanation:  

We know that the company's net cash income on December 31 is $ 75,000, which is why it is our base, we start from here.

Accounts receivable between January 1 and December 31 increased by +5000. (A flow of funds did not occur but it is a fact that is recorded according to the accrual principle).

Prepaid expenses decreased (-3000). (Prepaid expenses are a credit to the company and decrease over time).

The accumulated liabilities decreased by +500. (it is positive because a decrease in the liability means a lower debt for the company.)

Then we calculate from the base: $75000 + 5000 - 3000 + 500 = $77500

answer; complain or request hazard correction from your employer;

answer///the madrid protocol;