James owns an insurance agency. The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method. Revenue $250,000 Salaries and commisions $100,000 Rent $10,000 Insurance $5,000 Utilities $6,000 Accounts Receivable 1/1/2014 $40,000 Accounts Receivable 12/31/2014 $38,000 Accounts Payable 1/1/2014 $12,000 Accounts Payable 12/31/2014 $11,000 Calculate Nate\'s net profit using the cash method for 2014. Solution Below is the statement showing net profit using cash menthod .

1. James owns an insurance agency. The following selected data are taken from the agency balance
sheet and income statement prepared using the accrual method.
Revenue $250,000
Salaries and commisions $100,000
Rent $10,000
Insurance $5,000
Utilities $6,000
Accounts Receivable 1/1/2014 $40,000
Accounts Receivable 12/31/2014 $38,000
Accounts Payable 1/1/2014 $12,000
Accounts Payable 12/31/2014 $11,000
Calculate Nate's net profit using the cash method for 2014.
Solution
Below is the statement showing net profit using cash menthod
Statementshowing income
Particulars Amount
Revenues 252,000.00
Salaries and commissions (101,000.00)
Rent (10,000.00)
Insurance (5,000.00)
Utilities (6,000.00)

2. Profit 130,000.00
Opening bal of Acc receivable 40,000.00
Add Revenues 250,000.00
Less Cl bal of Acc Receivable (38,000.00)
Cash received 252,000.00
Opening bal of Acc payable 12,000.00
Add Salaries and commissions 100,000.00
Less Cl bal of Acc payable (11,000.00)
Cash received 101,000.00