Cash- and Accrual-Basis Accounting In the course of your examination of the books and records of Karen Company, you find the following data:

Required:
1. Compute Karen’s net income for 2009 using cash-basis accounting.
2. Compute Karen’s net income for 2009 using accrual-basis accounting.
3. Interpretive Question: Why is accrual-basis accounting normally used? Can you see any opportunities for improperly reporting income under cash-basis accounting? Explain.

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Salaries earned by employees in 2009 Salaries paid in 2009... Total sales revenue in 2009 $ 61,000 53,000 927,000 Cash collected from sales in 2009 952,000 Utilities expense incurred in 2009 7,500 Utility bills paid in 2009 6,300 Cost of goods sold in 2009 602,000 Cash paid on purchases in 2009 613,000 Inventory at December 31, 2009 416,000 Tax assessment for 2009 6,210 Taxes paid in 2009 Rent expense for 2009 Rent paid in 2009 5,930 36,000 41,000