*E3-19B (Cash and Accrual Basis) Letterman Corp. maintains its financial records on the cash basis of accounting.

*E3-19B (Cash and Accrual Basis) Letterman Corp. maintains its financial records on the cash basis of ccounting.

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.