Martin Sharp, who repairs lawn mowers, collects cash from his customers when the repair services are completed. He maintains an inventory of repair parts that are purchased from a wholesale supplier. Martin€™s records show the following information for the first three months of 2011.

Required:
1. Ignoring expenses other than repair parts, calculate net income for each of the three months on a cash basis.
2. Ignoring expenses other than repair parts, calculate net income for each of the three months on an accrual basis.
3. Why do decision-makers prefer the accrual basis of accounting?

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Cash Collected fo Repair Work $2,400 1,875 1,950 Cost of Repair Cash Payments to Cost of Parts Used Parts Purchased Supplier $820 0 695 in Repairs $635 295 390 January February March $710 440 0