In its first year of operations, Harden Co. earned $39,000 in revenues and received $33,000 cash from
These customers. The company incurred expenses of $22,500 but had not paid $2,250 of them at yearend.
Harden also prepaid $3,750 cash for expenses that would be incurred the next year. Calculate
The first year’s net income under both the cash basis and the accrual basis of accounting.


I am trying to figure out this answer... I came up with 12,750 for the cash basis net income, but I got the same thing for accrual... Help please!!

Accrual Method
Revenues 39,000
Expenses 22,500
Prepaid 0
Net Income = 16,500

Cash Method
Revenues 33,000
Expenses 20,250
Prepaid (Expense) 3,750
Net Income = 9,000

Cash Basis :
Cash received from customers : $33,000.00
Expenses incurred during current period : $22,500.00 - $2,250.00 = $20,250.00
Prepaid Expenses during the period : $3,750.00
First Year Net Income would be : $33,000.00 - ($20,250.00 + $3,750.00) = $9,000.00

Accrual Basis :
Revenues Earned during First Year End : $39,000.00
Expenses incurred during First year end : $22,500.00
First Year Net Income would be ( R-D) : $16,500.00

Please Note : Prepaid Expenses incurred in current period for future period is not an accrual. Accrual entry is booked for the unaccounted transactions happened during the current period and recognised in the future period.