In its first year of operations, Roma Company reports the following.• Earned revenues of $45,000 ($37,000 cash received from customers).• Incurred expenses of $25,500 ($20,250 cash paid toward them).Prepaid $6,750 cash for costs that will not be expensed until next year.Compute Roma's first-year net income under the cash basis and the accrual basis of accounting.RevenuesExpensesNet incomeCash BasisAccrual Basis

Answered: e cash basis and the accrual basis of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

Section: Chapter Questions

Problem 1RE: Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of...

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In its first year of operations, Roma Company reports the following.
• Earned revenues of $45,000 ($37,000 cash received from customers).
• Incurred expenses of $25,500 ($20,250 cash paid toward them).
Prepaid $6,750 cash for costs that will not be expensed until next year.
Compute Roma's first-year net income under the cash basis and the accrual basis of accounting.
Revenues
Expenses
Net income
Cash Basis
Accrual Basis

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Cash Basis and accrual Basis are accounting methods that differ in revenue and expense recognition. In Cash Basis, revenues and expenses get recognized when payment is made and cash is received. Under accrual basis, only revenues and expenses incurred for that period are recognized.

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