In its first year of operations, Solo Pty Ltd generated $71,270 for services provided, $11,370 of which was on account and still outstanding at year-end.

The remaining $59,900 was received in cash from customers. The company incurred operating expenses of $32,360.

Of these expenses $27,640 were paid in cash; $4,720 was still on account at year-end.

In addition, Solo Pty Ltd prepaid $6,060 for insurance that relates to the second year of operations.

Required

a) Calculate the first years profit under the cash basis of accounting.

b) Calculate the first years profit under the accrual basis of accounting.