[ncchris32]

Class Corp. Maintains its accounting records on the cash basis but restates its financial statements to the accural method of accounting. Class had $60,000 in cash-basis pretax income for 1992. The following information pertains to Class’s operations for the years ended December 31, 1992 and 1991:

Acct rec. 1991 = 20,000 ; 1992 = 40,000

Acct pay. 1991 = 30,000 ; 1992 = 15,000

Under the accural method, what amount of income before taxes should Class report in its December 31, 1992, income statement?

A. 25,000

B. 55,000

C. 80,000

D. 95,000

Answer is D per Becker materials. I understand that the 20k increase in acct rec is additional accural income. However, how is the 15k reduction in acct payable a source of income? As far as I’m aware paying down .acct payables is not a source of income.