In its first year of operations, Ramirez Company recognized $31,700in service revenue, $7,600of which was on account and still outstanding at year-end. The remaining $24,100was received in cash from customers.

The company incurred operating expenses of $17,100. Of these expenses, $12,020were paid in cash; $5,080was still owed on account at year-end. In addition, Ramirez prepaid $2,380for insurance coverage that would not be used until the second year of operations.

(a)Calculate the first years net earnings under the cash basis of accounting, and accrual basis of accounting.

Net Income

Cash Basis	Accrual Basis
$	$

(b)Which basis of accounting (cash or accrual) provides more useful information for decision-makers.......

Accrual Basis Or Cash Basis?