Al is a medical doctor who conducts his practice as a sole proprietor. During 2017, he received cash of $280,000 for medical services. of the amount collected, $40,00 organization (HMO) for services to be rendered in 2018. Compute Al’s gross income for 2017: 0 was for services provided in 2016. At the end of 2017, Al had accounts receivable of $60,000, all for services rendered in 201.In ad, he end of the year, Al receivied $12000as an advance payment fom a heath maintenance $12,000 as an advance payment from a health maintenance a. Using the cash basis of accounting. b. Using the accrual basis of accounting. C. Al should use the of accounting so that he will not have to pay income taxes on the
a ) According to cash basis of accounting, GI = Cash recd. 280000 + 12000 advance pymt. = $ 292000
b) According to accrual basis of accounting , GI = Closing bal. of Accounts receivable 60000 + cash recd. 280000 – Op. bal. 40000 = $ 300000 ( revenues )
AI should use the accrual basis of accounting so that he will not have to pay income taxes on the $ 12000.