Chapter 3, Problem 2ME

Reporting Cash Basis versus Accrual Basis Income

Skidmore Music Company had the following transactions in March:

1. a. Sold instruments to customers for $18,000 received $8,000 in cash and the rest on account. The cost of the instruments was $9,000.
2. b. Purchased $4,000 of new instruments inventory; paid $1,000 in cash and owed the rest on account.
3. c. Paid $900 in wages to employees who worked during the month.
4. d. Received $5,000 from customers as deposits on orders of new instruments to be sold to the customers in April.
5. e. Received a $300 bill for March utilities that will be paid in April.

Complete the following statements:

Cash Basis Income Statement	Accrual Basis Income Statement
Revenues	Revenues
Cash sales	Sales to customers
Customer deposits
Expenses	Expenses
Inventory purchases	Cost of sales
Wages paid	Wages expense
	Utilities expense
Net income	Net income