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During the last five months of the year, Dwana opens a new internet telecommunications business called Dwan-Com. Dwan-Com bills $50,000 of revenues, but receives only $40,000 cash. Dwan-Com incurs $3,000 of supply expenses, and $41,000 of labor costs. Dwan-Com pays for $2,200 of the supplies and $38,000 of the labor costs in the current year.
Required:
a. Under the cash method, Dwan-Com has a net of $.b. Dwan-Com's taxable income under the accrual method is $.c. What method of accounting do you recommend that Dwan-Com elect?
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