Selective Placement Services, Inc., experienced the following selected transactions during January:

Jan. 1 Prepaid insurance for January through March, \(\$ 600\).

4 Purchased office equipment for cash, \(\$ 1,400\).

5 Received cash for services performed, \(\$ 900\).

9 Paid gas bill, \(\$ 400\).

12 Performed services on account, \(\$ 1,500\).

14 Purchased office equipment on account, \(\$ 300\).

28 Collected \(\$ 500\) on account from January 12.

29 Paid salary expense, \(\$ 1,100\).

30 Paid account payable from January 14.

31 Recorded adjusting entry for January insurance expense (see Jan. 1).

31 Debited unearned revenue and credited revenue in an adjusting entry, \(\$ 700\).

\section*{Required}

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 January. Journal entries are not required. Use the following format for your answer, and show your computations:

2. Compute January net income or net loss under each method.
3. Indicate which measure of net income or net loss is preferable. Give your reason.

Transcribed Image Text:

Selective Placement Services, Inc.-Amount of Revenue or Expense for January Date Cash Basis Accrual Basis