Question

The following table provides Acme Corp's transaction for the month. Using the MODIFIED CASH BASIS method and only the transactions listed, calculated the firm's NET INCOME for the month. Enter negative values using the minus sign (e.g. -122)

Transaction	Value
Issued shares of capital stock for cash	10010
Rented space at a self-storage for 2 weeks paid cash	-400
Purchased supplies to be used on a job during this month payment due next month	-800
Received a loan from a bank to be paid back in 1 year	8468
Received payment from customer for work completed and billed in previous month	1360
Paid miscellaneous expenses	-800
Received payment for customer for work completed and billed during this month	6938
Billed a customer for work completed to be paid in the next month	3441
Paid hourly employees for work completed during the month	-2000
Recorded depreciation of office building	1000

Answer 1

Net income is calculated as under using the modified cash basis method :

Issued capital will not affect income as it is balance Sheet item .

Loan received is also a balance Sheetu item as it is liability .

Particulars		Amt
Payment from customer -billed previous month	1360
Payments from customer-billed current month	6938
Billed a customer (To be paid in next month Butwork completed now)	3441	11739
Rent paid	400
Purchases during during the month	800
Miscellaneous expenses	800
Wages to employees	2000
Depreciation	83.33	4083

Total net income for the month = Total receipts/accruals - total expenses paid /accrued.

=11739-4083.33

=7655.67

Depreciation is assumed to be of full year thus for the month =1000*1/12 (alternatively can be assumed to be 1000 per month in that case net income would be = 6739