Your examination of the records of Southlake Co. shows the company collected $85,500 cash from customers and paid $48,400 cash for operating costs during 2017. If Southlake followed the accrual basis of accounting, it would report the following year-end balances:

Instructions
(a) Determine Southlake's profit on a cash basis for 2017.
(b) Determine Southlake's profit on an accrual basis for 2017.
TAKING IT FURTHER
Which method do you recommend that Southlake use? Why?

Transcribed Image Text:

2017 2016 1,310 2,250 Accounts payable Accounts receivable Accumulated depreciation Prepaid insurance Supplies Unearned revenue 2,650 10,400 1,250 490 1,480 1,580 910 1,260