Conan Industries collected $100,000 from customers in 2011. Of the amount collec

Question

Conan Industries collected $100,000 from customers in 2011. Of the amount collected, $25,000 was from revenue earned on account in 2010. In addition, Conan earned $40,000 of revenue in 2011, which will not be collected until 2012.
Conan Industries also paid $70,000 for expenses in 2011. Of the amount paid, $30,000 was for expenses incurred on account in 2010. In addition, Conan incurred $42,000 of expenses in 2011, which will not be paid until 2012.
(a.)compute 2011 cash-basis net income
(b.)compute 2011 accrual-basis net income

I'm struggling with this, some help would go a long way.

Explanation / Answer

(a.)compute 2011 cash-basis net income This is simple.. Account for all income & expenses without bothering about period it relates to. So For 2011, Income is $100,000 & Expense is $70,000. So Net Income is 100,000-70,000 = $30,000 on Cash basis (b.)compute 2011 accrual-basis net income This refers to Income for 2011 only. So Income = 100,000 - 25000 (Year 2010)-40000(year 2012) = $35,000 Exp = 70,000 -30000(Year 2010)-42000(year 2012) = -$2000 So Net Income for 2011 is 35000-(-2000) = $37000 on accrual basis

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