Your examination of the records of Northland Co. shows the company collected $136,200 cash from customers and paid $108,700 cash for operating costs in 2021. If Northland followed the accrual basis of accounting, it would report the following year-end balances:

Instructions

a. Determine Northland?s profi t on a cash basis for 2021.

b. Determine Northland?s profi t on an accrual basis for 2021.

Which method do you recommend that Northland use? Why?

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2021 2020 Accounts payable Accounts receivable Accumulated depreciation Prepaid insurance Supplies $ 3,990 $ 1,460 6,100 18,250 620 550 13,200 15,000 1,530 2,350 1,560 Unearned revenue 7,400