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    Oct 7, 2013, 12:43 PM
    Accural and Cash Basis Accounting
    In its first year of operations, Ramirez Company recognized $32,200 in service revenue, $6,200 of which was on account and still outstanding at year-end. The remaining $26,000 was received in cash from customers.

    The company incurred operating expenses of $20,300. Of these expenses, $13,260 were paid in cash; $7,040 was still owed on account at year-end. In addition, Ramirez prepaid $2,700 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 accrual basis of accounting


    B)Which basis of accounting (cash or accrual) provides more useful information for decision-makers?

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