(Learning Objective 1: Linking accrual accounting and cash flows) During 2009 Valley Sales, Inc., earned revenues of $500,000 on account. Valley collected $510,000 from customers during the year. Expenses totaled $420,000, and the related cash payments were $400,000. Show what Valley would report on its 2009 income statement under the
a. Cash basis b. Accrual basis
Compute net income under both bases of accounting. Which basis measures net income better? Explain your answer.