Reporting Income: Cash versus Accrual Accounting On December 31, Daniel McGrath completed the first year of operations for his new business.

The following data are available from the company’s accounting records

1. How much net income (loss) should Daniel report for the year ended December 31 according to

(a) cash-basis accounting and

(b) accrual-basis accounting?
2. Which basis of accounting provides the better measure of operating results for Daniel?

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Sales to customers $265,000 Collections from customers 185,000 Interest earned and received on savings accounts 1,100 Amount paid on January 1 for one and one-half years' rent 18,000 Utility bill owed: to be paid next month 1,350 Cost of goods sold...... 123,000 Amount paid to suppliers for materials 104,500 Wages paid to employees ... Wages owed to employees at year-end Interest due at 12/31 on a loan to be paid the middle of next year 71,000 3,500 950