Conan Industries collected $100,000 from customers in 2008. Of the amount collected, $25,000 was from revenue earned on account in 2007. In addition, Conan earned $40,000 of revenue in 2008, which will not be collected until 2009.
Conan Industries also paid $70,000 for expenses in 2008. Of the amount paid, $30,000 was for expenses incurred on account in 2007. In addition, Conan incurred $42,000 of expenses in 2008, which will not be paid until 2009.
Instructions:
(a) Compute 2008 cash-basis net income.
(b) Compute 2008 accrual-basis net income.