Fred's Catering Ltd. had the following selected transactions during May 2020:

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.

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.

Transcribed Image Text:

May 1 5 9 Received $800 in advance for a banquet to be served later Paid electricity expenses, $700 Received cash for the day's sales, $2,000 14 Purchased two food warmers, $1,800 23 31 Served a banquet, receiving a note receivable, $700 Accrued salary expense, $900 31 Prepaid $3,000 building rent for June and July