Current Attempt in Progress

In its first year of operations, Pharoah Company recognized $$34,000$ in service revenue, $$8,100$ of which was on account and still

outstanding at year$-$end. The remaining $$25,900$ was received in cash from customers.

The company incurred operating expenses of $$17,100.$ Of these expenses, $$12,940$ were paid in cash; $$4,160$ was still owed on

account at year$-$end. In addition, Pharoah prepaid $$2,780$ for insurance coverage that would not be used until the second year of

operations.

$($a$)$

Calculate the first year's net earnings under the cash basis of accounting, and calculate the first year's net earnings under the

accrual basis of accounting.

Cash Basis

Accrual Basis