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LO.2,5 Al is a medical doctor who conducts his practice as a sole proprietor. During 2021, he received cash of $280,000 for medical services. Of
LO.2,5 Al is a medical doctor who conducts his practice as a sole proprietor. During 2021, he received cash of $280,000 for medical services. Of the amount collected, $40,000 was for services provided in 2020. At the end of 2021, Al had accounts receivable of $60.000, all for services rendered in 2021. In addition, at the end of the year, Al received $12,000 as an advance payment from a health maintenance organization (HMO) for services to be rendered in 2022. Compute Als gross income for 2021 a. Using the cash basis of accounting. b. Using the accrual basis of accounting. c. Advise Al on which method of accounting he should use. 32. LO.2 Selma operates a contractor's supply store. She maintains her books using the cash method. At the end of 2021, her accountant computes her accrual basis income that is used on her tax return. For 2021, Selma had cash receipts of $1,400,000, which included $200,000 collected on accounts receivable from 2020 sales. It also included the proceeds of a $100,000 bank loan. At the end of 2021, she had $250,000 in accounts receivable from customers, all from 2021 sales. a. Compute Selma's accrual basis gross revenues for 2021 b. Selma paid cash for all of the purchases. The total amount paid for merchandise in 2021 was $1,300,000. At the end of 2020, she had merchandise on hand with a cost of $150,000. At the end of 2021, the cost of merchandise on hand was $300,000. Compute Selma's gross income from merchandise sales for 2021
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