Question

I need help with 5 through 8

Use the following to answer questions 5 - 6 Following is a February transaction for a company. Calculate the amount of expense to recognize in February. In February the company paid their employees $25,000; $20,000 for work performed in February and $5,000 for work performed in January. 5. Accrual basis expense: $ 6. Cash basis expense: $. Use the following to answer 7-8 Following is a February transaction for a company. Calculate the amount of revenue to recognize in February. In February the company performed $50,000 of service and they billed their customers. Customers paid $40,000 this month and will pay the remaining $10,000 next month. 7. Accrual basis revenue: $ 8. Cash basis revenue: $

Answer 1

Under Accrual basis, expenses are recorded at the time of their occurrence, it does not matter when actual cash is paid for them.

In February, company paid $25,000 to employees. Out of which, $20,000 is for work performed in February and $5,000 is for work performed in January. Hence, under accrual basis, expense is $20,000.

Under cash basis, actual cash payment is recorded as expense in the month of payment. Hence, $25,000 will be recorded as expense in February under cash basis.

5. Accrual basis expense = $20,000

6. Cash basis expense = $25,000

Under Accrual basis, revenues are recorded at the time when goods are sold or services are performed, it does not matter when actual cash is received for them.

In February, company provided $50,000 services. Out of which, $40,000 is to be received in February and $10,000 is to be received in March. Hence, under accrual basis, revenue is $50,000.

Under cash basis, actual cash receipt is recorded as revenue in the month of receipt. Hence, $40,000 will be recorded as revenue in February under cash basis.

7. Accrual basis revenue = $50,000

8. Cash basis revenue = $40,000

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