Hal Corp Prepared the Following Income Statement Using the Cash Basis

question 113

Essay

Hal Corp. prepared the following income statement using the cash basis of accounting:
Additional data:
1. Depreciation on a company automobile for the year amounted to $6,000. This amount is not included in the expenses above.
2. On January 1, 2010, paid for a two-year insurance policy on the automobile amounting to $1,800. This amount is included in the expenses above.
Instructions
(a) Recast the above income statement on the accrual basis in conformity with generally accepted accounting principles. Show computations and explain each change.
(b) Explain which basis (cash or accrual) provides a better measure of income.

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Definitions:

Disposable Supplies

Medical or laboratory items intended for one-time or temporary use to ensure hygiene and reduce the risk of contamination.

Physical Examination

A thorough assessment and evaluation of a person's body and its functions using inspection, palpation, percussion, and auscultation.

Accessibility

The ease with which people can move into and out of a space.

Ultrasonic Cleaner

A cleaning device that uses ultrasound waves and an appropriate cleaning solution to clean delicate items.