2. The Larson Company prepared the following income statement using the cash basis of accounting: THE...

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2. The Larson Company prepared the following income statement using the cash basis of accounting: THE LARSON COMPANY Income Statement, Cash Basis Year Ended December 31, 2017 Service revenue Expenses Profit $460,000 220,000 S240,000 Additional data: 1. were provided in 2016, and who was billed in 2016. There are an additional $15,000 of expenses that were incurred on account, for which payment will not be made until 2018. Depreciation on a company automobile for the year amounted to $7,000. This amount is not included in the expenses above. On December 1, 2017, paid $1,600 for two months' rent (December and Januar This amount is included in the expenses above. Service revenue includes $40,000 collected from a customer for whom services 2. 3. 4. Instructions a) Prepare Larson's income statement on the accrual basis in conformity with generally accepted accounting principles. Show calculations and explain each change. b) Explain which basis (cash or accrual) provides a better measure of profit. 2. The Larson Company prepared the following income statement using the cash basis of accounting: THE LARSON COMPANY Income Statement, Cash Basis Year Ended December 31, 2017 Service revenue Expenses Profit $460,000 220,000 S240,000 Additional data: 1. were provided in 2016, and who was billed in 2016. There are an additional $15,000 of expenses that were incurred on account, for which payment will not be made until 2018. Depreciation on a company automobile for the year amounted to $7,000. This amount is not included in the expenses above. On December 1, 2017, paid $1,600 for two months' rent (December and Januar This amount is included in the expenses above. Service revenue includes $40,000 collected from a customer for whom services 2. 3. 4. Instructions a) Prepare Larson's income statement on the accrual basis in conformity with generally accepted accounting principles. Show calculations and explain each change. b) Explain which basis (cash or accrual) provides a better measure of profit.