Tully Taylor established Tully’s Phone App Productions in 2024 and kept her accounting records on a cash basis. During 2026, Tully decided to switch her accounting to the accrual basis and has asked you to help her convert the 2024 and 2025 financial statements to an accrual basis. Your analysis of the accounting records revealed the following data:

Required

(a) Using the above data, complete abbreviated income statements in the form shown below for the years 2024 and 2025 for both the cash basis and accrual basis of accounting. Show supporting calculations in good form.

(b) Show the differences that would result in the 31 December 2025 statement of financial position accounts from using the accrual basis as compared to the cash basis.

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Consulting fees revenue 2024 2025 Cash collected for apps developed during the year Charged customers for apps developed during the year, but cash was not received until the following year 45 600 $159 600 $165300 57 000 Prepaid revenue collected in 2024 for apps developed in 2025 Expenses 8550 Cash paid for services received 91 200 96 900 Accrued expenses at end of the year paid for in the following year 39 900 41 600 Prepaid expenses: Cash paid during the year 22 000 34 000 Amount prepaid at the end of the year 17200 39 800