D is corrent. The requirement is to determine the difference between cash-basis and accrual-basis income. This question requires the calculation of accrual-based income, as shown below.| Cash-basis pre-tax income | $100,000 | | Increase in accounts receivable | + 10,000 | | Decrease in accounts payable | + 6,000 | | Accrual-basis income | $116,000 |
This cash pretax income is $16,000 ($116,000 – $100,000) lower than the accrual-basis income.A is incorrect. The requirement is to determine the difference between cash-basis and accrual-basis income. This question requires the calculation of accrual-based income, as shown below.| Cash-basis pre-tax income | $100,000 | | Increase in accounts receivable | + 10,000 | | Decrease in accounts payable | + 6,000 | | Accrual-basis income | $116,000 |
This cash pretax income is $16,000 ($116,000 – $100,000) lower than the accrual-basis income.B is incorrect. The requirement is to determine the difference between cash-basis and accrual-basis income. This question requires the calculation of accrual-based income, as shown below.| Cash-basis pre-tax income | $100,000 | | Increase in accounts receivable | + 10,000 | | Decrease in accounts payable | + 6,000 | | Accrual-basis income | $116,000 |
This cash pretax income is $16,000 ($116,000 – $100,000) lower than the accrual-basis income.C is incorrect. The requirement is to determine the difference between cash-basis and accrual-basis income. This question requires the calculation of accrual-based income, as shown below.| Cash-basis pre-tax income | $100,000 | | Increase in accounts receivable | + 10,000 | | Decrease in accounts payable | + 6,000 | | Accrual-basis income | $116,000 |
This cash pretax income is $16,000 ($116,000 – $100,000) lower than the accrual-basis income. |
