Question

1.Given the following:

$7 $4 Increase in Prepaid Expenses Decrease in Unearned Revenue Increase in Accrued Expenses Cash paid for expenses $9 $50

What is accrual-basis expenses?

Select one:

a. $45

b. $63

c. $55

d. $52

e. $37

2.Venice Corp. maintains its accounting records on the cash basis but restates its financial statements to the accrual method of accounting. Venice had $120,000 in cash-basis pretax income for 2018. The following information pertains to Venice's operations for the years ended December 31, 2018 and 2017:

Accounts receivable Accounts payable 2018 $80,000 30,000 2017 $40,000 60,000

Under the accrual method, what amount of income before taxes should Venice report on its December 31, 2018 income statement?

Select one:

a. $130,000

b. $110,000

c. $70,000

d. $50,000

e. $190,000

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Answer #1
1
Cash paid for expenses 50
Add: Increase in Accrued expenses 9
Less: Increase in prepaid expenses -7
Accrual-basis expenses 52
Option D $52 is correct
2
Cash-basis pretax income 120000
Add: Increase in Accounts Receivable 40000 =80000-40000
Add: Decrease in Accounts Payable 30000 =60000-30000
Accrual method income before taxes 190000
Option E $190,000 is correct
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