Reference no: EM132465804

Problem - Cash Flow Income vs. Accrual (GAAP) Income. ABC Corporation is a new company. It determines net income using a "cash basis" method. Its income statement for the first period appears below:

ABC Corporation Income Statement (Cash Basis)

Revenue $ 25,000

Expenses

Supplies          $ (2,000)

Equipment            $ (12,000)

Salaries               $ (4,000)

Net Income             $ 7,000

You determine the following:

point (1) $7,000 of the revenues represent advance payments for work not completed by ABC.

point (2) Supplies on hand as of the end of the period amount to $1,500.

point (3) The equipment has an expected life of 5 years, and an expected salvage value of $2,000.

Required:

Question 1: Using EXCEL, create a new income statement applying the accrual income (GAAP) principles.