During 2016, Nicholson Network, Inc., which designs network servers, earned revenues of $800 million. Expenses totaled $570 million. Nicholson collected all but $21 million of the revenues and paid $600 million on its expenses. Nicholson's top managers are evaluating 2016, and they ask you the following questions:
a. Under accrual accounting, what amount of revenue should Nicholson Network report for 2016? How does the revenue principle help to answer these questions?
b. Under accrual accounting, what amount of total expense should Nicholson Network report for 2016? Which accounting principle helps to answer this question?
c. Redo parts a and b using the cash basis. Explain how the accrual basis differs from the cash basis.
d. Which financial statement reports revenues and expenses? Which statement reports cash receipts and cash payments?