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In its first year of operations, Cullumber Company recognized $31,800 in service revenue, $6,600 of which was on account and still outstanding at year-end. The remaining $25,200 was received in cash from customers.
The company incurred operating expenses of $17,100. Of these expenses, $12,830 were paid in cash; $4,270 was still owed on account at year-end. In addition, Cullumber prepaid $2,720 for insurance coverage that would not be used until the second year of operations.
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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