Your examination of the records of Southlake Corp. shows the company collected $187,800 in cash from customers and paid $109,400 in cash for operating costs. If Southlake followed the accrual basis of accounting, it would report the following year-end balances:

Instructions
(a) Determine Southlake's profit on an accrual basis for 2012.
(b) Determine Southlake's profit on a cash basis for 2012.
(c) Which method do you recommend Southlake use? Why

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Accounts receivable Prepaid insurance Accumulated depreciation Accounts payable Income tax payable Unearned revenue 2012 $ 8,400 3,000 24,600 3,000 15,800 2,800 2011 $5,400 2,600 20,000 4,500 14,000 3,000