question 12\nusing the help of some high - school students, growing seeds llc mowed lawns on eastwood avenue…

question 12\nusing the help of some high - school students, growing seeds llc mowed lawns on eastwood avenue in may. it paid the high school students $100 in june for the work performed in may. it sent bills to its customers for $250 in june for its may mowing work but did not receive payment until july. by how much will growing seeds llcs july accrual - basis net income differ from its cash - basis net income or loss?\na $250\nb $100\nc $0\nd $150

question 12\nusing the help of some high - school students, growing seeds llc mowed lawns on eastwood avenue in may. it paid the high school students $100 in june for the work performed in may. it sent bills to its customers for $250 in june for its may mowing work but did not receive payment until july. by how much will growing seeds llcs july accrual - basis net income differ from its cash - basis net income or loss?\na $250\nb $100\nc $0\nd $150

Answer

Explanation:

Step1: Calculate accrual - basis net income

Accrual - basis records revenue when earned and expense when incurred. In May, revenue of $250 was earned and expense of $100 was incurred. So net income in accrual - basis for May (recognized in June when billed) is $250 - $100=$150. In July, no additional revenue or expense related to this job occurs in an accrual - basis sense.

Step2: Calculate cash - basis net income

Cash - basis records revenue when cash is received and expense when cash is paid. In June, $100 was paid out as an expense. In July, $250 was received as revenue. So net income in cash - basis in July is $250 - $0 = $250 (since expense was recognized in June).

Step3: Find the difference

The difference between accrual - basis and cash - basis net income in July is $250-(250 - 100)=$100.

Answer:

B. $100