What is Martins income for the month of October?

Question

10/1 Martin buys two new saws on credit at $375 each. the saws are added to martins rental fleet; payment is due in 30 days.
10/8 martin accepts advance deposits for tool rentals of $75
10/15 martin receives a $150 bill for electricity provided by the electric company, payment is due in 30 days
10/20 martin charges customers $750 for tool rentals, payment is due from customers in 30 days
10/31 martin recieves payments of $500 from customers billed for rentals on october 20.

Answer 1

Using the accrual method, net income for the month is $600.

Revenue is $750 for tool rentals charged to customer.
Expense is $150 for electricity, so $750-$150 = $600

The saws purchased are used in the rental business, therefore they are capital and are not expensed.

The advanced deposits are would not be recognized as income but as liability on the balance sheet.

The $500 received from customers would be applied against the accounts receivable balance. It would not affect income.

Using the cash method, income and expense are recognized when cash is paid so revenue would be $500 for the cash received from customers. Since the electric bill was not paid in Oct, expenses are zero so net income is also $500.

Answer 2

Gross Income
Accrual Basis of Acctg: $750.00
Cash Basis: $500.00

Net Income
Accrual:$500
Cash:$500

Answer 3

Is income is $575.