O'Hara Inc. made sales of $350,000 during 2008, its first year of operations. Of this $10,000 remained in accounts receivable at the end of the year. Additionally, the company paid and incurred $200,000 in expenses during the year. The company also prepaid $2,000 of it's 2009 insurance and recorded $4,000 of depreciation expense in December 2008.
What is the company's cash basis net income?
350,000 sales - 10,000 accts receivable = 340,000
200,000 incurred and paid + 2,000 prepaid insurance = 202,000
My answer is $138,000, but I'm not sure that's right...© BrainMass Inc. brainmass.com June 4, 2020, 1:27 am ad1c9bdddf
This solution calculates the net income for a company based on a cash basis.