E3-19B (Cash and Accrual Basis)

E3-19B (Cash and Accrual Basis) Letterman Corp. maintains its financial records on the cash basis of accounting.
Interested in securing a long-term loan from its regular bank, Letterman Corp. requests you as
its independent CPA to convert its cash-basis income statement data to the accrual basis. You are provided
with the following summarized data covering 2013, 2014, and 2015.
2013 2014 2015
Cash receipts from sales:
On 2013 sales $600,000 $201,000 $75,000
On 2014 sales –0– 701,000 161,000
On 2015 sales 602,000
Cash payments for expenses:
On 2013 expenses 360,000 42,000 25,000
On 2014 expenses 10,000a 406,000 71,000
On 2015 expenses 21,000b 451,000
aPrepayments of 2014 expenses.
bPrepayments of 2015 expenses.
Instructions
(a) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the
cash basis.
(b) Using the data above, prepare abbreviated income statements for the years 2013 and 2014 on the
accrual basis.