USA: +1 725-224-8795 
Sign in
Please show me step by step how I should go about this 
Exercise 4-5 In its first year of operations, Blossom Company recognized $33,400 in service revenue, $7,700 of which was on account and still outstanding at year-end. The remaining $25,700 was received in cash from customers The company incurred operating expenses of $18,500. Of these expenses, $12,760 were paid in cash; $5,740 was still owed on account at year-end In addition, Blossom 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 the first year’s net earnings under the accrual basis of accounting Cash Basis Accrual Basis Net Income s (b) Which basis of accounting (cash or accrual) provides more useful information for decision-makers? Accrual basis
Expert Answer
a) CALCULATE FIRST YEAR’S NET EARNINGS UNDER THE CASH BASIS OF ACCOUNTING, AND THE FIRST YEAR’S NET EARNINGS UNDER THE ACCURAL BASIS OF ACCOUNTING :
| Cash Basis | Accural Basis | |
| Service revenue | 25700 | 33400 |
| Less: Operating expenses | (12760) | (18500) |
| Less: Insurance coverage | (2780) | |
| Net income | 10160 | 14900 |
B) Accural Basis of accounting provides more useful information of decision-makers..
