Compute Lawrence's accrual-based net income for 2018.

Question

Quizplus · Accepted Answer

To compute accrual-based net income for a period, we need to adjust the cash-based net income for changes in balance sheet items. 
For Lawrence:
Cash-based net income = $322,000.
Adjustments:
- Increase in accounts receivable = $12,000
- Decrease in inventory = $7,500
- Increase in prepaid expenses = $1,000
- Decrease in accounts payable = $4,500
- Increase in wages payable = $1,500
Accrual-based net income = $322,000 + $12,000 - $7,500 + $1,000 - $4,500 + $1,500 = $329,500. 
Therefore, the best choice is B.

Compute Lawrence's Accrual-Based Net Income for 2018