In its first year of operations, Queenan Company earned $30,000 in service revenue, $8,000 of which was on account and still outstanding at year-end. The remaining $22,000 was received in cash from customers. The company incurred operating expenses of $15,500. Of these expenses $13,000 was paid in cash; $2,500 was still owed on account at year-end. In addition, Queenan prepaid $2,600 for insurance coverage that would not be used until the second year of operations.

Instructions
(a) Compute Queenan’s first-year cash flow from operations.
(b) Compute Queenan’s first-year net income under accrual-basis accounting.
(c) Which basis of accounting (cash or accrual) provides more useful information for decision makers?