Question

Sweet Catering completed the following selected transactions during May 2016: May 1: Prepaid rent for three months. 3.000 May 5: Received and paid electricity bill, 550 May 9: Received cash for meals served to customers, 5160 May 14: Paid cash for kitchen equipment, 52.440 • May 23: Served a banquet on account, 52,150 • May 31: Made the adjusting entry for rent (from May 1). • May 31: Accrued salary expense, 5170 • May 31: Recorded depreciation for May on kitchen equipment, 5440 If Sweet Catering had recorded transactions using the Cash method, how much net income doss) would they have recorded for the month of May? if there is a loss.enter it with parentheses or a negative sign 770 if Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a los enter it with parentheses or a negative sign 650

Answer 1

Statement Showing classification of transactions.

Date	Particulars	Amount	Cash Method	Accrual Method
1-May	Prepaid Rent for 3 months	$3,000	Total $ 3000 shall be recorded as expenses	$3000 shall be recorded as prepaid rent
5-May	Received and paid electricity bill	$50	Total $ 50 shall be recorded as expenses	Total $ 50 shall be recorded as expenses
9-May	Received Cash for meal served to customers	$160	Total $ 160 shall be recorded as income	Total $ 160 shall be recorded as income
14-May	Paid cash for kitchen equipment	$2,440	Total $ 2440 shall be recorded as expenses	$2440 shall be recorded as asset
23-May	Served a banquet on account	$2,150	Total $ 2150 shall be recorded as income	Total $ 2150 shall be recorded as income
31-May	Made the adjustment entry for rent	$1,000	No entry required	$1000 shall be transferred to expenses
31-May	Accrued Salary Expenses	$170	No entry required	Total $ 170 shall be recorded as expenses
31-May	Recorded depreciation for may on kitchen equipment	$440	No entry required	Total $ 440 shall be recorded as expenses

Income Statement

For the month of May

Particulars	Cash Method	Accrual Method
A. Income
Meal served directly to customers	$160	$160
Meal served in banquet	$2,150	$2,150
Total (A)	$2,310	$2,310
B. Expenses
Rent Expenses	$3,000	$1,000
Electricity Expenses	$50	$50
Depreciation on Kitchen Equipment	$0	$440
Purchase of Kitchen Equipment	$2,440	$0
Salary	$0	$170
Total (B)	$5,490	$1,660
Profit/Loss (A-B)	-$3,180	$650