Cash-Basis and Accrual-Basis Income}

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 2018.

\section*{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. CONCEPTUAL CONNECTION Why do decision makers prefer the accrual basis of accounting?
\section*{Problem

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