A company maintains its records using accrual basis accounting; however, their accountant wants to create a statement of cash flows and needs to determine the cash flow from operating activities. For simplicity, we assume only one expense account (salaries). The following is data gathered from their records. Services provided to customers during the period $600,00
Salaries expense for the period 350,000
Accounts receivable beginning balance 45,000
Accounts receivable (ending balance) 20,000
Salaries payable( beginning balance) 14,000
Salaries a able (ending balance) 8,000

Required:
a. Determine the amount of cash collected from customers during the period.
b. Determine the amount for cash paid for salaries during the period.
c. Determine accrual basis net income for the period.
d. Determine cash basis net income for the period.

Answer and Explanation:

The computation is shown below;

a. The amount of cash collection from customers is

= $45,000 + $600,000 - $20,000

= $625,000

b. The amount of cash paid for salaries is

= $14,000 + $350,000 - $8,000

= $356,000

c, The accrual basis net income is

= $600,000 - $350,000

= $250,000

d. The cash basis net income is

= $625,000 - $356,000

= $269,000

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