(Prepare income statements using cash and accrual accounting, LO 1, 6) You have been provided the following information about Lunenberg Ltd. (Lunenberg) as of the end of its first year of operations. Lunenberg began business just over a year ago.

Required:

Calculate income on the cash basis and on the accrual basis of accounting 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 $118,000 11,200 Amounts paid to suppliers for business supplies 34,700 Amounts owing to suppliers for business supplies 8,100 Business supplies on hand at the end of the year 2,800 Amounts paid to employees for work done 17,500 Amounts owing to employees for work done 2,200 Advances paid to employees for work that will be done in the future 1,000 Amortization of assets 4,000 Income taxes 7,500