Roberts Company Prepared the Following Income Statement Using the Cash

Essay

Roberts Company prepared the following income statement using the cash basis of accounting:
ROBERTS COMPANY
Income Statement, Cash Basis
Year Ended December 31, 2013
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Service revenue (does not include $40,000 of services performed on account Additional data:
1. Depreciation on a company automobile for the year amounted to $6,000. This amount is not included in the expenses above.
2. On July 1, 2013, paid for a one-year insurance policy on the automobile amounting to $1,800. This amount is included in the expenses above.
Instructions
a. Prepare Roberts Company's income statement on the accrual basis in conformity with generally accepted accounting principles. Show calculations and explain each change.
b. Explain which basis (cash or accrual) provides a better measure of profit.