Question

2. What amount was paid to suppliers?

3. How much was paid for operating expenses?

4. How much is the cash basis net income?

Answer 1

2. The cash paid to suppliers for purchases relating to inventory is calculated by adjusting cost of goods sold from the income statement for movements in inventory and accounts payable from the balance sheet.

3. Cash Paid for Operating Expenses (Includes Research and Development) = Operating Expenses + Increase (or - decrease) in prepaid expenses + decrease (or - increase) in accrued liabilities.

4. Under the cash-basis method, you may not record any expenses that you have been billed for but have not paid. Subtract your total cash-basis expenses from your cash-basis income. The answer will be cash-basis net income.