Latta Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Latta Corp. requests you as its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided with the following summarized data covering 2011, 2012, and 2013. 2011 2012 2013 Cash receipts from sales: On 2011 sales $290,000 $160,000 $ 30,000 On 2012 sales -0- 355,000 90,000 On 2013 sales 408,000 Cash payments for expenses: On 2011 expenses 185,000 67,000 25,000 On 2012 expenses 40,000a 170,000 55,000 On 2013 expenses 45,000b 218,000 aPrepayments of 2012 expenses. bPrepayments of 2013 expenses. Instructions
(a) Using the data above, prepare abbreviated income statements for the years 2011 and 2012 on the cash basis.
(b) Using the data above, prepare abbreviated income statements for the years 2011 and 2012 on the accrual basis.