Guardian Corp.sells $6,250 of goods on account in the current year and collects $3,250 of this.It incurs $4,200 in expenses on account during the current year and pays $2,600 of them.Guardian would report what amount of net income under the cash and accrual bases of accounting, respectively?
A)$2,050 on the cash basis and $3,000 on the accrual basis
B)$3,250 on the cash basis and $4,200 on the accrual basis
C)$3,000 on the cash basis and $1,600 on the accrual basis
D)$650 on the cash basis and $2,050 on the accrual basis

Question

Quizplus · Accepted Answer

Under the cash basis, net income is calculated as cash received ($3,250) minus cash paid for expenses ($2,600), resulting in $650. Under the accrual basis, net income is calculated as revenue earned ($6,250) minus expenses incurred ($4,200), resulting in $2,050.