Tim Has Decided to Run a Lawn Service Business for the Summer.He

question 44

Essay

Tim has decided to run a lawn service business for the summer.He charges customers $100 per month to mow and maintain their lawns.In May he was able to get 10 contracts signed, for services starting
June 1st.On June 1st he collected $100 from each of seven customers and $300 from the other three, who will all be out of town for the summer so have paid for all three months at once.Tim bought a second-hand mower for the summer for $240, which he picked up in May but didn't pay for until June, when he had some cash
available.He estimates that it will be completely worn out by the end of the summer.He mowed and maintained the lawns for June and paid $50 for gas for his mower.
Required:
A) What is Tim's net income for June under the cash basis of accounting?
B) What is Tim's net income for June under the accrual basis of accounting?
C) What is Tim's expected net income for the summer under the cash basis of accounting?
D) What is Tim's expected net income for the summer under the accrual basis of accounting?
E) Which method is more appropriate for Tim? Support your answer.

• A) What is Tim's net income for June under the cash basis of accounting?
• B) What is Tim's net income for June under the accrual basis of accounting?
• C) What is Tim's expected net income for the summer under the cash basis of accounting?
• D) What is Tim's expected net income for the summer under the accrual basis of accounting?
• E) Which method is more appropriate for Tim? Support your answer.

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