Question

Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question The Blue Nile Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $1,170 for six months of advertising. Blue Nile Law Firm recorded $1,170 in the Prepaid Advertising account. If Blue Nile Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28? Enter this value as a positive number. Secure Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Secure Home has collected $2,710 from cash-paying customers. Secure Home's remaining customers owe the business $760. Secure Home recorded $2,710 of service revenue for the year. If Secure Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? Momentous Occasions received $2,070 for services to be performed for the next 8 months on March 31 and recorded this transaction using the Unearned Revenue account If Momentous Occasions had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? Sweet Catering completed the following selected transactions during May 2016: May 1: Prepaid rent for three months, $2,700 May 5: Received and paid electricity bill, $130 May 9: Received cash for meals served to customers, $2,270 May 14: Paid cash for kitchen equipment, $2,250 May 23: Served a banquet on account, $2,420 .May 31: Made the adjusting entry for rent (from May 1). May 31: Accrued salary expense, $560 May 31: Recorded depreciation for May on kitchen equipment, S670 If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) wauld they have recorded for the manth of May? If there is a loss, enter it with parentheses or a negative sign. If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) wauld they have recorded for the manth of May? If there is a loss, enter it with parentheses or a negative sign.

Answer 1

1
a
Accrual basis
Other method - $1170
b
Cash basis
Other method - $3470
c
Accrual basis
Other method - $2070
2
Revenue	2270
Expenses:
Rent expense	2700
Electricity expense	130
Depreciation expense	2250
Total expenses	5080
Net income under Cash method	-2810
Revenue	4690	=2270+2420
Expenses:
Rent expense	900
Electricity expense	130
Depreciation expense	670
Salary expense	560
Total expenses	2260
Net income under Accrual method	2430
3
Delivery expense	Income Statement
Furniture	Balance Sheet
Utilities payable	Balance Sheet
Salaries (and wages) expense	Income Statement
Rent payable	Balance Sheet
Depreciation expense	Income Statement