E 19 (Cash and Accrual Basis) Latta Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long term loan from its regular bank, Latta 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
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2011 |
2012 |
2013 |
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Cash receipts from sales: |
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On 2011 sales |
$290,000 |
$160,000 |
$30,000 |
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On 2012 sales |
–0– |
355,000 |
90,000 |
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On 2013 sales |
408,000 |
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Cash payments for expenses: |
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On 2011 expenses |
185,000 |
67,000 |
25,000 |
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On 2012 expenses |
40,000a |
170,000 |
55,000 |
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On 2013 expenses |
45,000b |
218,000 |
aPrepayments of 2012 expenses.
bPrepayments of 2013 expenses.
Instructions
(a) Using the data above, prepare abbreviated income statements for the years 2011 and 2012 on the cash basis.
(b) Using the data above, prepare abbreviated income statements for the years 2011 and 2012 on the accrual basis.