In its first year of operations, Ivanhoe Company recognized $$29,800$ in service revenue, $$7,000$ of which was on account and still outstanding at year$-$end. The remaining $$22,800$ was received in cash from customers.

The company incurred operating expenses of $$19,000.$ Of these expenses, $$13,140$ were paid in cash; $$5,860$ was still owed on account at year$-$end. In addition, Ivanhoe prepaid $$3,150$ for insurance coverage that would not be used until the second year of operations.

X 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.

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