On June 1, Royal Corp. began operating a service company with an initial cash in

Question

On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $3,900,000. The company provided $7,500,000 of services in June and received full payment in July. Royal also incurred expenses of $3,100,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $820,000. What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting?

Cash Basis Accrual Basis

$4,400,000 $4,400,000


$8,300,000 $3,580,000


$7,500,000 $4,400,000


$7,500,000 $3,580,000

Explanation / Answer

$7,500,000 $3,580,000

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