In its first year of operations, Boswell Corp earned $55,000 in service revenue. Of that...
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In its first year of operations, Boswell Corp earned $55,000 in service revenue. Of that amount, $11,000 was still on account and the remainder $44,000 was collected in cash from customers. The company incurred operating expenses of $31,000, of which $27,500 was paid in cash. At year end $3,500 was still owning on account. Moreover, Boswell prepaid $2,000 for insurance coverage that covered the last half of the first year and the first half of the second year. Boswell expects to owe $4,200 of income tax when it files for corporate income tax return after year end. a)Calculate the first years profit under the cash basis of accounting? b) Calculate the first years profit under the accrual basis of accounting? c)Which basis gives the most useful information for decision makers?
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