In its first year of operations, Crane Company recognized $ in service revenue, $ of which was on account and still outstanding at yearend. The remaining $ was received in cash from customers.
The company incurred operating expenses of $ Of these expenses, $ were paid in cash; $ was still owed on account at yearend. In addition, Crane prepaid $ for insurance coverage that would not be used until the second year of operations.
a Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under the accrual basis of accounting.
tableCash Basis,Accrual BasisNet earnings
b Which basis of accounting cash or accrual provides more useful information for decisionmakers?
