Question

Mark is a physical therapist and a client. On February 1, 2020, Mark starts his own business, Mark’s PT Services, LLC. He uses Quickbooks for his accounting. He comes to meet with you on March 1, 2021 and brings his financial statements for Mark’s PT Services, LLC. His financial statements show the following:

Cash	40,000.00
Accounts Receivable	7,500.00
Equipment	32,000.00
Accumulated Depreciation	(8,000.00)
Total Assets	71,500.00
Accounts Payable	3,300.00
Equity - Mark	10,000.00
Net Income	58,200.00
Total Liabilities & Equity	71,500.00

What is Mark’s taxable income from his business under the accrual method? Under the cash method?

Answer 1

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Answer is highlighted in yellow: Solution: a) Mark's taxable income from business - accrual method (Equals net income) $ 58,200 b) $ 58,700 Taxable income - Cash method = (58200-7500+8000) (Net income - Accounts Recivable + Depreciation