Question

In its first year of operations, Crane Company recognized $29,500 in service revenue, $6,100 of which was on account and still outstanding at year-end. The remaining $23,400 was received in cash from customers. The company incurred operating expenses of $15,500. Of these expenses, $12,010 were paid in cash; $3,490 was still owed on account at year-end. In addition, Crane prepaid $2,300 for insurance coverage that would not be used until the second year of operations. * Your answer is incorrect. Calculate the first year's net earnings under the cash basis of accounting, and the first year's net earnings under the accrual basis of accounting. Cash Basis Accrual Basis Net Income $ 14000 9090 eTextbook and Media . Your answer is incorrect. Which basis of accounting (cash or accrual) provides more useful information for decision-makers? Cash basis

Answer 1

Correct answer for requirement 1

	Cash basis	Accrual basis
Net Income	$    9,090.00	$ 14,000.00

Working

	Cash basis	Accrual basis
Revenues	23400	29500
Less: Expenses	=12010+2300	15500
Net Income	=23400-14310	=29500-15500

The prepaid expense will also be considered as expense in cash basis of accounting.