In its first year of operations, Roma Company reports the following. Earned revenues of $53,000 ($45,000 cash received from customers). Incurred expenses of $29,500 ($23,050 cash paid toward them). Prepaid $8,750 cash for costs that will not be expensed until next year.

In its first year of operations, Roma Company reports the following. Earned revenues of $53,000 ($45,000 cash received from customers). Incurred expenses of $29,500 ($23,050 cash paid toward them). Prepaid $8,750 cash for costs that will not be expensed until next year. calculate the first year's net income under both the cash basis and the accrual basis of accounting.

Answer:

Kindly check explanation

Step-by-step explanation:

Given the following :

Earned revenue = $53,000

Cash received from customers = $45000

Incurred expenses = $29,500

Cash paid towards incurred expenses = $23,050

Cash which will not be expensed till next year = $8,750

Cash Accounting:

Cash received $45,000

Expenses ($23,050 + $8750) = $31,800

Net Income $(45,000 - 31,800) = $13,200

Accrual Accounting :

Revenue earned $53,000

Expenses incurred $29,500

Net income $(53,000 - 29,500) = $23500