Problem
A company sells $10,000 on account in the current year and collects $7,500 of these accounts receivable. It incurs $6,000 in expenses on account during the year and pays $4,000 of its accounts payable. The company would report what amount of net earnings under the cash and accrual bases of accounting, respectively?
a. $4,000 on the cash basis and $3,500 on the accrual basis
b. $3,500 on the cash basis and $4,000 on the accrual basis
c. $6,000 on the cash basis and $3,500 on the accrual basis
d. $1,500 on the cash basis and $6,000 on the accrual basis.