A company has always kept its records on a cash basis. You are provided with the following transaction information for the fiscal year ending December 31, 2024:
1. A new comprehensive insurance policy requires an annual payment of $12,000 for the upcoming year. Coverage began on September 1, 2024, at which time the first payment was made.
2. Customers may pay using a credit card. At the end of the current year, various credit card companies owed the company $6,500. At the end of last year, customer credit card charges outstanding were $5,000.
3. Employees are paid once a month, on the 10th of the month following the work period. Cash disbursements to employees were $8,200 and $7,200 for January 10, 2025, and January 10, 2024, respectively.
4. Utility bills outstanding totaled $1,200 at the end of 2024 and $900 at the end of 2023.
5. A physical count of inventory is always taken at the end of the fiscal year. The inventory on hand at the end of 2024 cost $35,000. At the end of 2023, inventory on hand cost $32,000.
6. At the end of 2023, the company did not have any bills outstanding to suppliers of inventory. However, at the end of 2024, suppliers are owed $4,000.

Required:
1. The 2024 cash basis net income (after one adjustment for depreciation expense) is $26,000. Determine net income applying the accrual accounting model.
2. Explain the effect on the balance sheet of converting from cash to accrual. That is, would assets, liabilities, and owner’s equity be higher or lower and by what amounts?