Blue spruce industries collected $106,000 from customers in 2020. of the amount collected, $25,700 was for services performed in 2019. in addition, blue spruce performed services worth $41,600 in 2020, which will not be collected until 2021. blue spruce industries also paid $71,700 for expenses in 2020. of the amount paid, $30,800 was for expenses incurred on account in 2019. in addition, blue spruce incurred $43,800 of expenses in 2020, which will not be paid until 2021.

(a) compute 2020 cash-basis net income.
(b) compute 2020 accrual-basis net income.

Cash basic net income  

1  

Db Cash106000  

Cr Revenue  106000

2  

Db Expemses71700  

Cr Cash  71700

Accrual basic net income  

1  

Db Cash106000  

Cr Account Receivable  25700

Cr Revenue  80300

2  

Db Account recerivable___41600  

Cr Revenue  41600

3  

Db Account payable30800  

Db Expenses40900  

Cr Cash  71700

4  

Db Expenses43800  

Cr Account payable  43800

Explanation:

The cash basis is a method of recording accounting transactions for revenue and expenses only when the corresponding cash is received or payments are made. Thus, you record revenue only when a customer pays for a billed product or service, and you record a payable only when it is paid by the company

Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are earned. When the revenues are earned but cash is not received, the asset accounts receivable will be recorded. (Under the cash basis of accounting, revenues are not reported on the income statement until the cash is received.)

Collected106000from customer in 2020

Collected 201925700Services 2019

Collected 202080300Services 2020

Services 202041600collected in 2021

Paid  71700expenses  

Paid expenses 201930800expenses 2019

Paid expenses 202040900expenses 2020

Expenses43800Paid in 2021

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