The records of Summers Building Company reveal the following information for 2019.
a. Cash receipts during 2019 (including $50,000 paid by stockholders in exchange for common stock) were $273,500.
b. Cash payments during 2019 (including $8,000 of dividends paid to stockholders) were $164,850.
c. Total selling price of services billed to customers during 2019 was $201,700.
d. Salaries earned by employees during 2019 were $114,250.
e. Cost of supplies used during 2019 in operation of the business was $47,325.
Required:
1. Calculate Summers Building's net income for 2019 on an accrual basis.
2. Calculate Summers Building's net income for 2019 on a cash basis.
3. Explain how cash-basis accounting allows for the manipulation of income.