Question

Sweet Catering completed the following selected transactions during May 2016: • May 1: Prepaid rent for three months, $2,400 May 5: Received and paid electricity bill, 580 May 9: Received cash for meals served to customers, 5850 • May 14: Paid cash for kitchen equipment, 53,230 • May 23: Served a banquet on account, $2,080 • May 31: Made the adjusting entry for rent (from May 1). May 31: Accrued salary expense, $2,590 • May 31: Recorded depreciation for May on kitchen equipment, $280 If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month 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) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign.

Answer 1

	Income As per Cash basis
	Sales	850
	Total Sales	850
	Rent Expense	2,400
	Electricity Exp	80
	Kitchen Equipment	3,230
	Total Expense	5,710
	Net Income/(Loss)	(4,860)
	Income As per Accrual basis
	Sales-Meal served	850
	Sales-Banquet	2,080
	Total Sales	2,930
	Rent Expense	800
	Electricity Exp	80
	Salary Expense	2,590
	Depreciation Expense	280
	Total Expense	3,750
	Net Income/(Loss)	(820)