Accrual Basis of Accounting versus Cash Basis of Accounting

On December 31, Hermani Patterson completed his first year as a financial planner. The following data are available from his accounting records:

Answer the following two questions:

a. Compute Hermani's net income for the year just ended using the accrual basis of accounting.

b. Compute Hermani's net income for the year just ended using the cash basis of accounting.

Fees billed to clients for services rendered Cash received from clients Supplies purchased for cash Supplies used during the year Cash paid for rent (rent is paid through Feb. of next year) Rent expense for year just ended $137,000 $12,000 5,200 3,200 Salary earned by assistant 39,000 Salary paid to assistant35,000 5,000 Utility expense incurred ,500 Utility bills paid 6,800 14,000