Business, 05.05.2020 08:05 glowbaby123

In its first year of operations, Sheridan Company recognized $31,000 in service revenue, $7,700 of which was on account and still outstanding at year-end. The remaining $23,300 was received in cash from customers.

The company incurred operating expenses of $20,100. Of these expenses, $13,090 were paid in cash; $7,010 was still owed on account at year-end. In addition, Sheridan prepaid $2,950 for insurance coverage that would not be used until the second year of operations.

Required:
a. Calculate the first year’s net earnings under the cash basis of accounting, and accrual basis of accounting.
b. Which basis of accounting (cash or accrual) provides more useful information for decision-makers?

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In its first year of operations, Sheridan Company recognized $31,000 in service revenue, $7,700 of w...

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