Fred's Catering Ltd. had the following selected transactions during May 2017: May 1 Received $800 in advance

Question:

Fred's Catering Ltd. had the following selected transactions during May 2017:

May 1 Received $800 in advance for a banquet to be served later

5 Paid electricity expenses, $700

9 Received cash for the day's sales, $2,000

14 Purchased two food warmers, $1,800

23 Served a banquet, receiving a note receivable, $700

31 Accrued salary expense, $900

31 Prepaid $3,000 building rent for June and July


Requirements

1. Show how each transaction would be handled using the cash basis and the accrual basis. Under each column, give the amount of revenue or expense for May. Journal entries are not required. Use the following format for your answer, and show your computations. Ignore depreciation expense.

Fred's Catering Ltd.

Amount of Revenue (Expense) for May 2017

Date ............................................. Cash Basis .................... Accrual Basis

2. Compute income (loss) before tax for May under the two accounting methods.

3. Which method better measures income and assets? Use the last transaction to explain.

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Related Book For  book-img-for-question

Financial Accounting

ISBN: 978-0134564142

6th Canadian edition

Authors: Walter Jr. Harrison, Charles T. Horngren, C. William Thomas, Greg Berberich, Catherine Seguin

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