ACCRUAL- AND CASH-BASIS EXPENSES Speedy Delivery Company provides next-day delivery across the southeastern United States. During May, Speedy incurred $120,000 in fuel costs. Speedy paid $90,000 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort to build up its supply of fuel.

Required:

Calculate the amount of expense recognized in May under

(a) the cash-basis of accounting and

(b) the accrual-basis of accounting.

Cornerstone Exercise