Reference no: EM13576529

Cash versus accrual basis of accounting. Thompson Hardware Store commences operations on January 1, 2008, when Jacob Thompson invests $30,000 for all of the common stock of the firm. The firm rents a building on January 1 and pays two months' rent in advance in the amount of $2,000. On January 1 it also pays the $1,200 premium for property and liability insurance coverage for the year ending December 31, 2008. The firm purchases $28,000 of merchandise inventory on account on January 2 and pays $10,000 of this amount on January 25. On January 31 the cost of unsold merchandise is $15,000. During January the firm makes cash sales to customers totaling $20,000 and sales on account totaling $9,000. The firm collects $2,000 from these credit sales by the end of January. The firm pays other costs during January as follows: utilities, $400; salaries, $650; and taxes, $350. What are Thompson Hardware Store's revenues, expenses, and income for January, assuming (1) the accrual basis of accounting, and (2) the cash basis of accounting?