Your examination of the records of Southlake Co. shows the company collected $85,500 cash from customers and paid $48,400 cash for operating costs during 2014. If Southlake followed the accrual basis of accounting, it would report the following year-end balances:

Instructions
(a) Determine Southlake's profit on a cash basis for 2014.
(b) Determine Southlake's profit on an accrual basis for 2014.
TAKING IT FURTHER Which method do you recommend Southlake use? Why?

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2014 2013 Accounts payable Accounts receivable Accumulated depreciation Prepaid insurance Supplies Unearned revenues $1,500 4,200 11,300 1,500 750 1,200 $2,250 2,700 10,000 1,300 400 1,500