Question

Use the following information to answer questions 34 and 35. The following transactions occurred for the Summerhill Company during the month of November: 2400x =100 Nov. 1 The company bought and paid $2,400 for a 2 year insurance policy. Nov. 15 A telephone bill in the amount of $150 was received and is due in 30 days. 250 Nov. 20 The company bought 20 units of inventory for $5,000 by paying 50% cash with the balance to be paid in 30 days. 50 2500 Nov. 25 The company sold 16 units of its inventory and received money for 12 of them with the balance to be received in 30 days. Boo Pa 250X12>2002 Nov. 30 Depreciation expense on the equipment amounts to $500 a month J00 34. Expenses for the month of November using the accrual basis of accounting is: zuoo a. $5,850 2400 to +150 +500 b. $4,750 c. $4,600 V500 d. $3,250 35. Expenses for the month of November using the cash basis of accounting is: b. a. $4,750 b. $5,400 c. $5,900 d. $4,900 100 + 2500 +500 - 2400 +150 + 2500 +12450

Answer 1

A A Answer to Question 34: Calculation of Expense for the month of November using accrual basis of accounting: Insurance Expense ($2400/24 Months x 1 Month) 100.00 Telephone Expense $ 150.00 Cost of Goods Sold ($5000/20units x 16 Units) $ 4,000.00 Depreciation Expense for November Month $ 500.00 Total Expense under Accrual Basis $ 4,750.00 So, Option b is Correct Answer. Answer to Question 35: Calculation of Expense for the month of November using Cash basis of accounting: Insurance Expense 2,400.00 Inventory Purchases ($5000 x 50%) 2,500.00 Total Expense under Cash Basis $ 4oooo 4,900.00 So, Option d is Correct Answer.