Problem: Total Pool Services earned $130,000 of service revenue during 2016. Of the $130,000 earned, the business received $105,000 in cash. The remaining amount, $25,000, was still owed by customers as of December 31. In addition, Total Pool Services incurred $85,000 of expenses during the year. As of December 31, $10,000 of the expenses still needed to be paid. In addition, Total Pool Services prepaid $5,000 cash in December 2016 for expenses incurred during the next year.

Required:

Question 1: Determine the amount of service revenue and expenses for 2016 using a cash basis accounting system.

Question 2: Determine the amount of service revenue and expenses for 2016 using an accrual basis accounting system.