Problem At the end of 2018, Showtime Company reported the foll Sales on account \( 3,700,000 \) Cash sales Cost of sales Salaries and wage paid during the year During 2018, the company collected \( 40 \% \) of the sales salaries to employees of 30,000 . Required: Determine the gross income and salaries expenses us 1. accrual method 2. cash basis method

To determine the gross income and salaries expenses using both the accrual method and the cash basis method, we need to analyze the information provided. ### Given Data: - Sales on account: \( 3,700,000 \) - Cash sales: Not provided, but we can infer it from the total sales. - Cost of sales: Not provided. - Salaries and wages paid during the year: \( 30,000 \) - During 2018, the company collected \( 40\% \) of the sales. ### 1. Accrual Method **Gross Income Calculation:** - Under the accrual method, we recognize revenue when it is earned, regardless of when cash is collected. - Total sales (on account + cash sales) = \( 3,700,000 + \text{Cash Sales} \) - Since cash sales are not provided, we will assume that all sales are on account for this calculation. - Gross Income = Total Sales - Cost of Sales **Salaries Expense Calculation:** - Under the accrual method, we recognize salaries expense when it is incurred, regardless of when it is paid. - Salaries Expense = \( 30,000 \) ### 2. Cash Basis Method **Gross Income Calculation:** - Under the cash basis method, we recognize revenue when cash is received. - Cash collected from sales = \( 40\% \) of \( 3,700,000 \) = \( 0.40 \times 3,700,000 = 1,480,000 \) - Gross Income = Cash Collected - Cost of Sales (Cost of Sales is still not provided) **Salaries Expense Calculation:** - Under the cash basis method, we recognize salaries expense when cash is paid. - Salaries Expense = \( 30,000 \) (since this is the amount paid during the year) ### Summary of Results 1. **Accrual Method:** - Gross Income = \( 3,700,000 - \text{Cost of Sales} \) - Salaries Expense = \( 30,000 \) 2. **Cash Basis Method:** - Gross Income = \( 1,480,000 - \text{Cost of Sales} \) - Salaries Expense = \( 30,000 \) ### Note: To complete the calculations for gross income, we need the cost of sales, which is not provided in the problem statement. If you have that information, you can substitute it into the formulas above to find the final gross income figures.