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(2 pts) Accrual basis vs. basis revenue and expense recognition: Suppose Capaldi Corp. provides travel services to customers and noted the following transactions for May

(2 pts) Accrual basis vs. basis revenue and expense recognition: Suppose Capaldi Corp. provides travel services to customers and noted the following transactions for May 2018:

Transaction:

Accrual basis revenue / (expense):

Cash basis

revenue / (expense):

Provided services to customers for $2,920 in cash.

Paid $6,000 in cash for Junes rent.

Received $3,900 in cash from customers for services to be provided in June.

Received bill from insurance company for Mays monthly premium of $2,000. Cash payment will be made on June 7th.

Paid $600 in cash for utilities used in May.

Paid workers $9,100 in cash for work performed in April.

Received $8,100 in cash from customers for services provided in April on account.

Issued common stock for $10,000 in cash.

Provided services to customers for $5,900 on account. Cash collections related to these services will not be received from customers until June.

For each transaction, determine the amount of revenue or (expense), if any, that is recorded under accrual-basis accounting and under cash-basis accounting for May 2018. I have completed transaction a. for you as an example.

(2 pts) Accrual Based Accounting: Prepaid expenses Depreciation of Fixed Assets. Moving On, Inc. purchases a new moving truck (e.g. equipment) for $56,000 on October 1st, 2017. At the time of its purchase, the truck is expected to be used in operations for 4 years and will have no resale or scrap value at the end of its life. Assume Moving On, Inc. uses straight-line depreciation (i.e. the asset depreciates evenly) over the expected life of the truck.

Record the journal entry for the original purchase of the truck that occurs on October 1st, 2017.

Record the adjusting entry to recognize Depreciation Expense on December 31, 2017.

What will the ending balance of the Accumulated Depreciation account be on December 31, 2018 (Assume the beginning balance of Accumulated Depreciation on January 1st, 2017 is $0 and Moving On, Inc. has no other assets that depreciate)?

What will the net book value of the truck be on December 31, 2018?

(2 pts) Accrual Based Accounting: Deferred (unearned) revenues. Suppose that on November 29th, 2017 a customer pays Ood Sphere, Ltd. $2,000 cash in advance for merchandise which will be delivered to the customer on December 5th.

Record the journal entry for the original purchase of the merchandise that occurs on November 29th, 2017.

Record the adjusting entry Ood Sphere, Ltd. should record on December 5th to recognize sales revenue.

Suppose the cost of the merchandise sold (i.e. COGS) is $1,600. When should Ood Sphere, Ltd. record this expense? Why? Briefly explain your answer.

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