In its first year of operations, Case Co. earned $60,000 in revenues and received $52,000 cash from these customers. The company incurred expenses of $37,500 but had not paid $6,000 of them at year-end.

Case also prepaid $3,250 cash for expenses that would be incurred the next year.

a. Compute the first year’s net income under the cash basis of accounting.

b. Compute the first year’s net income under the accrual basis of accounting.