The Striped Marlin Company (SMC) maintains its records on the cash basis of accounting during the year and then records adjusting entries at the end of the year to convert them to the accrual basis of accounting. The Companys year-end is December 31.

The following occurred during the year:

1. On March 1, 2020, SMC borrowed $200,000 from a bank. The full principal amount and interest at 6% will be paid on February 28, 2022. No accrual was recorded for interest for 2020.

2. On April 1, 2020, SMC paid $132,000 for rent of prime space at the marina for 2 years. The entire amount was recorded as rent expense and no adjusting entry was recorded for this item.

3. On October 1, 2020, SMC received $10,400 from a customer for a deep-sea fishing trip in 2021. The full amount was recorded as revenue and no adjusting entry was recorded for this item.

Based only on the forgoing information,

a. What is the cash basis net income or loss for the year ended December 31, 2020?

Please show your work and label the amounts in your calculation. [3 points]

b. Prepare the necessary adjusting entry, if any, for items 1-3 above to covert the cash basis accounting to accrual basis accounting. Please label each entry by the item number; clearly label the journal entry to indicate the debit and credit account, whether the account is a balance sheet or income statement account; and the amount. Also, show your work for calculated amounts. [12 points]

c. What is the accrual basis net income or loss for the year ended December 31, 2020? Please show your work and label the amounts in your calculation. [3 points]