Reporting Cash Basis versus Accrual Basis Income
Payson Sports, Inc., sells sports equipment to customers. Its fiscal year ends on December 31. The following transactions occurred in 2012:
a. Purchased $314,000 of new sports equipment inventory; paid $90,000 in cash and owed the rest on account.
b. Paid employees $164,200 in wages for work during the year; an additional $4,800 for 2012 wages will be paid in January 2013.
c. Sold sports equipment to customers for $630,000; received $520,000 in cash and the rest on account. The cost of the equipment was $387,000.
d. Paid $17,200 cash for utilities for the year.
e. Received $35,000 from customers as deposits on orders of new winter sports equipment to be sold to the customers in January 2013.
f. Received a $1,740 bill for December 2012 utilities that will be paid in January 2013.
Required:
1. Complete the following statements:

2. Which basis of accounting (cash or accrual) provides more useful information to investors, creditors, and other users?Why?

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