(Prepare income statements using cash and accrual accounting, LO 1, 4) You have been provided the following information about Lunenberg Ltd. (Lunenberg) as of the end of its first year of operations.

Required:
Calculate net income on the cash basis and on the accrual accounting basis for Lunenberg. Explain why the cash basis and the accrual basis result in different amounts of income.

Transcribed Image Text:

Cash collected from customers Amounts owing from customers Amounts paid to suppliers for business supplies Amounts owing to suppliers for business supplies $206,500 19,600 60,725 14,175 Business supplies on hand at the end of the year 4,900 Amounts paid to employees for work done 30,625 Amounts owing to employees for work done 3,850 Advances paid to employees for work that will be done in the future 1,750 Depreciation of assets 7,000 Income taxes paid 13,125