The Barden Company Provides the Following Information from Its Year

question 48

Multiple Choice

The Barden Company provides the following information from its Year 3 and Year 4 balance sheets:
$\begin{array}{lrr}&\text { Year } 3&\text { Year } 4\\\text { Accounts receivable } & \$ 115,000 & \$ 97,500 \\\text { Inventory } & 120,000 & 130,000 \\\text { Prepaid insurance } & 7,500 & 1,500 \\\text { Prepaid rent } & 40,000 & 15,000 \\\text { Accounts payable } & 55,000 & 65,000\end{array}$
The following information is available from the Year 4 income statement:
$$\begin{array} {| l r | } \hline \text { Sales } & \$ 425,000 \\\text { Cost of goods sold } & 225,000 \\\text { Insurance expense } & 12,000 \\\text { Rent expense } & 25,000\\\hline\end{array}$$
-Assuming that the information provided from the income statement represents all of the pre-tax income of Barden Company,what is the difference between the accrual-basis and cash-basis income in Year 4?

• A)Accrual exceeds cash basis by $16,500.
• B)Cash exceeds accrual basis by $23,500.
• C)Accrual exceeds cash basis by $25,000.
• D)Cash exceeds accrual basis by $48,500.

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