Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question The Purple Tulip Law Firm prepays for advertising in the local newspaper On January 1, the law firm paid $2,040 for six months of advertising Purple Tulip Law Firm recorded $2,040 in the Prepaid Advertising account If Purple Tulip Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28 Sweet Catering completed the following selected transactions during May 2016 May 1 Prepaid rent for three months, $2,100 May 5 Received and paid electricity bill, $90 May 9 Received cash for meals served to customers, $2,520 May 14 Paid cash for kitchen equipment, $3,770 May 23 Served a banquet on account, $1,900 May 31 Made the adjusting entry for rent (from May 1) May 31 Accrued salary expense, $2,290 May 31 Recorded depreciation for May on kitchen equipment, $560 If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month of May If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 27, 2024

Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question. The Purple Tulip

Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question.

The Purple Tulip Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $2,040 for six months of advertising. Purple Tulip Law Firm recorded $2,040 in the Prepaid Advertising account.

If Purple Tulip Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28?

Sweet Catering completed the following selected transactions during May 2016:

May 1: Prepaid rent for three months, $2,100
May 5: Received and paid electricity bill, $90
May 9: Received cash for meals served to customers, $2,520
May 14: Paid cash for kitchen equipment, $3,770
May 23: Served a banquet on account, $1,900
May 31: Made the adjusting entry for rent (from May 1).
May 31: Accrued salary expense, $2,290
May 31: Recorded depreciation for May on kitchen equipment, $560 If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month of May? If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May?