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Claymore Corporation maintains its book on a cash basis. During 2016, the company collected $800,000 in...

Claymore Corporation maintains its book on a cash basis. During 2016, the company collected $800,000 in fees from its clients and paid $500,000 in expenses. You are able to determine the following information about accounts receivable, supplies, prepaid rent, salaries payable, and interest payable: January 1, 2016 December 31, 2016 Accounts receivable $110,000 $120,000 Supplies 15,000 15,000 Salaries and wages payable 16,500 14,200 Interest payable 4,000 5,500 In addition, 2016 depreciation expense on office equipment and furniture is $55,000. Required: Determine accrual basis income for 2016. Show your work including whether you are adding or subtracting the amount to arrive at accrual basis income.

Cash basis net income Increase in accounts receivable Increase in supplies Decrease in salaries and wages payable Depreciation expense Increase in interest payable Accrual basis income

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Answer #1
   Cash basis net income ($800,000 – 500,000) $   300,000
   Add:
   Increase in accounts receivable ($120,000 – 110,000) $     10,000
   Increase in supplies ($15,000 – 15,000) $              -  
   Decrease in salaries and wages payable ($16,500 –14200) $       2,300
   Deduct:
   Depreciation expense $   (55,000)
   Increase in interest payable ($5,500 – 4,000) $      (1,500)
Accrual basis net income $   255,800
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