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Question
Carls Catering just completed its first year of operations. During the year, the following events took place.
Customer payments in the amount of $64,000 were received at the time the catering services were performed.
Additional catering services totaling $35,000 were performed on account for customers; payments amounting to $6,000 were received from those customers.
On the last day of the year, a local company paid $3,000 for catering services to be performed in 30 days.
Employee wages totaled $25,000 and were paid in cash.
The costs of food, beverages, and supplies used when catering services were performed amounted to $26,000 and were paid for in cash. (Note: Categorize these costs as cost of goods sold.)
Unpaid bills for delivery costs during the year amounted to $1,000 and were on hand at the end of the year.
On the last day of the year, the company paid $12,000 in advance for rent on office space.
Required:
Part a. Determine the net income for Carls Catering on a cash basis.
Part b. Determine the net income for Carls Catering on an accrual basis.
Answer
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