Net income cash-basis accounting-accrual-basis accounting

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Reference no: EM13153945

In the course of your examination of the books and records of Karen Company, you find the following data:

Salaries earned by employees in 2009 $61,000

Salaries paid in 2009 53,000

Total sales revenue in 2009 927,000

Cash collected from sales in 2009 952,000

Utilities expense incurred in 2009 7,500

Utility bills paid in 2009 6,300

Cost of goods sold in 2009 602,000

Cash paid on purchases in 2009 613,000

Inventory at December 31, 2009 416,000

Tax assessment for 2009 6,210

Taxes paid in 2009 5,930

Rent Expense for 2009 36,000

Rent paid in 2009 41,000

Required:

1. Compute Karen's net income for 2009 using cash-basis accounting

2. Compute Karen's net income for 2009 using accrual-basis accounting

3. Why is accrual-basis accounting normally used?

Reference no: EM13153945

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