Question

Accrual vs Cash basis May 1: Prepaid rent for three months, $1,800 May 5: Received and paid electricity bill, $120 May 9: Received cash for meals served to customers, $3,440 May 14: Paid cash for kitchen equipment, $2,620 May 23: Served a banquet on account, $2,580 May 31: Made the adjusting entry for rent (from May 1). May 31: Accrued salary expense, $2,630 May 31: Recorded depreciation for May on kitchen equipment, $330
	1.) 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.
	2.) 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

1.) If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month of

Revenue	3440
Electricity expense	-120
Rent expense	-1800
kitchen equipment	-2620
Net income (loss)	-1100

2.) 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.

Revenue (3440+2580)	6020
Rent expense (1800/3)	-600
Electricity expense	-120
Depreciation expense	-330
Salary expense	-2630
Net income	2340