Question

Metlock Industries collected $104,000 from customers in 2019. Of the amount collected, $25,800 was for services performed in 2018. In addition, Metlock performed services worth $38,600 in 2019, which will not be collected until 2020. Metlock Industries also paid $73,600 for expenses in 2019. Of the amount paid, $30,200 was for expenses incurred on account in 2018. In addition, Metlock incurred $43,300 of expenses in 2019, which will not be paid until 2020. Compute 2014 cash-basis net income.

Answer 1

cash-basis net income = $30,400

Step-by-step explanation:

Cash-basis accounting system states that revenues and expenses are recognized whenever the cash is received and cash is incurred. Therefore, it is not necessary to think when the cash will be received or when the cash will be paid.

We know, cash-basis net income = Cash revenue - Cash expenses

In 2019, Metlock collected $104,000 as revenues, and paid $73,600 as expenses.

Therefore, Cash-basis net income = $104,000 - $73,600 = $30,400

All the other entries are not necessary because those are yet to collect or pay.