Cash-Basis and Accrual-Basis Income}

George Hathaway, an electrician, entered into an agreement with a real estate management company to perform all maintenance of basic electrical systems and air-conditioning equipment in the apartment buildings under the company's management. The agreement, which is subject to annual renewal, provides for the payment of a fixed fee of \(\$ 6,420\) on January 1 of each year plus amounts for parts and materials billed separately at the end of each month. Amounts billed at the end of one month are collected at some point in the future. During the first three months of 2018, George makes the following additional billings and cash collections:

Required:
1. Calculate the amount of cash-basis income reported for each of the first three months.
2. Calculate the amount of accrual-basis income reported for each of the first three months.
3. CONCEPTUAL CONNECTION Why do decision makers prefer the accrual basis of accounting?
\section*{OBJECTIVE 2 Problem

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January February March Billings for Parts and Materials Cash Collected Cash Paid for Parts and Materials $510 $6,530* $375 0 435 280 380 0 315 Cost of Parts and Materials Used $360 270 330