Reference no: EM132540141
Question - In its first year of operations, Athabasca Corp. earned $66,000 in service revenue. Of that amount, $8,800 was on account and the remainder, $57,200, was collected in cash from customers.
The company incurred various expenses totalling $32,900, of which $29,400 was paid in cash. At year end, $3,500 was still owing on account. In addition, Athabasca prepaid $2,000 for insurance coverage that covered the last half of the first year and the first half of the second year. Athabasca expects to owe $3,000 of income tax when it files its corporate income tax return after year end.
Required -
a) Calculate the first year's net income under the accrual basis of accounting.
b) Calculate the first year's net income under the cash basis of accounting.
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