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Samantha Dolan operates a small consulting business as a sole proprietor. During 2018, she has...

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Accounting

Samantha Dolan operates a small consulting business as a sole proprietor. During 2018, she has the following transactions related to the business:

Customer sales on account

$75,000

Collections from 2018 Credit Sales

$5,000

Collections from 2018 Credit Sales

$18,000

Business Bad debts

$8,000

Operating expenses incurred during 2018

$44,000

Operating expenses from 2018 paid in 2018

$33,000

Operating expenses from 2018 paid in 2018

$10,000

  1. Calculate the net income or loss from Samanthas business using the accrual method of accounting

  2. Calculate the net income or loss from Samanthas business using the cash method of accounting.

  3. What accounts for the difference in the two net incomes and how does this benefit or cause a problem for a trade or business?

Note from instructor: I would just use both as displayed. I think theyre just trying to make you take into account multiple line items like you will in real life (but they would probably be named differently).

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