On December 31, Brian Silvaggi completed the first year of operations for his new business. The following data are available from the company s accounting records:
|
Sales to customers |
145,000 |
|
Collections from customers |
125,000 |
|
Interest earned and received on savings accounts |
1,500 |
|
Amount paid for one and one half years rent |
3,600 |
|
Utility bill owed: to be paid next month.. |
960 |
|
Cost of goods sold |
80,000 |
|
Amount paid to suppliers for materials .. |
83,000 |
|
Wages paid to employees |
47,500 |
|
Wages owed to employees at year end |
1,200 |
|
Interest due at 12/31 on a loan to be paid the middle of next year. |
800 |
1. How much net income (loss) should Brian report for the year ended December 31 according to (a) cash basis accounting and (b) accrual basis accounting?
2. Which basis of accounting provides the better measure of operating results for Brian?