Juan Works as a Landscaper for Local Businesses on Weekends

question 137

Essay

Juan works as a landscaper for local businesses on weekends, and he often provides services in exchange for property. This year Juan provided lawn-mowing services in exchange for $1,275 of car repair services, $3,570 of groceries, and a certificate of deposit (CD)for $4,050. The CD matures next year with interest. Finally, Juan received a gift card that can only be applied for $850 of clothing at a local mall. Juan has only applied the gift card to purchase $100 of clothing. Compute Juan's gross income, assuming that he uses the cash basis of accounting.

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Definitions:

Accruals

Accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash transaction occurs.

Indirect Method

A method used to prepare the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate the cash from operating activities.

Term Deposit

A bank deposit with a fixed term and interest rate, where the money must remain deposited for a specified duration, incurring penalties for early withdrawal.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value.