Megan Peroni and Shannon Haley both graduated from State University in May 2004. After graduation, Shannon took a job as a staff accountant in the Atlanta office of PricewaterhouseCoopers, an international public accounting firm. Megan began working as a manager in Arrow Electronics, a wholesale computer hardware and software company, but left after only six months to start her own consulting business. The following conversation took place between Megan and Shannon at their first annual alumni function:
Megan: Shannon, good to see you again.
Shannon: Yes. It doesn’t seem like it’s been almost a year since we graduated. Megan: That’s for sure. It seems like only yesterday we were listening to that boring commencement speaker. I don’t even remember her name . . . Monica somebody.
Are you still working for PricewaterhouseCoopers?
Shannon: Yes, it’s been a great year. I’ve worked on thirteen companies . . . it’s been a fantastic learning experience. Each client has a different culture, management team, strategy, problems, and personality. I’ve learned something new every day. How about you? Are you still working for Arrow Electronics?
Megan: No, I quit after six months. My customers really didn’t know what they needed for computer systems . . . so . . . I quit and started a consulting business. I feel like I’m helping my customers more now than I did before. Besides, I like being my own boss.
Shannon: What’s the name of your business?
Megan: I-Chor Consulting. It’s been amazing. I started with my savings of $10,000 six months ago. My last bank statement showed I’ve got more than $120,000—”pure profit” of $110,000 in only six months.
Shannon: That’s unbelievable! If you ever need a CPA firm, keep us in mind.
Megan: Sure. What are friends for anyway?
1. Comment on Megan’s statement that she’s earned $110,000 “pure profit” in only six months.
2. Would the cash basis or the accrual basis of accounting be most appropriate for I-Chor?