Answer:
a. Cash basis of accounting - $7,400,000
b. Accrual basis of accounting - $5,271,000
Explanation:
Mainly there are two methods of accounting for recording transactions in financial statements. They are - Cash basis of accounting and the accrual basis of accounting
Under the cash basis of accounting, whenever the cash is received it will be recorded. So, $7,400,000 would be recorded as a company's income before income taxes.
And, under the accrual basis of accounting, whether cash is received or not but it will be recorded in the books of accounts.
So, the income before income taxes would be
= Revenue - expenses
= $7,400,000 - $2,129,000
= $5,271,000
