P3-66A (Learning Objective 1: Explain how accrual accounting differs from cash-basis accounting) Masters Consulting had the following selected transactions in July: Jul 1 4 5 8 11 19 24 26 29 31 31 Prepaid insurance for July through November, $2,000. Purchased office furniture for cash, $1,000. Performed services and received cash, $800. Paid advertising expense, $700. Performed service on account, $3,400. Purchased computer on account, $2,000. Collected for July 11 service. Paid account payable from July 19. Paid salary expense, $1,500. Adjusted for July insurance expense (see July 1). Earned revenue of $1,000 that was collected in advance back in June. Requirements 1. Show how each transaction would be handled using the cash basis and the accrual basis. 2. Compute July income (loss) before tax under each accounting method. 3. Indicate which measure of net income or net loss is preferable. Use the transactions on July 11

P3-66A (Learning Objective 1: Explain how accrual accounting differs from cash-basis accounting) Masters Consulting had the following selected transactions in July: Jul 1 4 5 8 11 19 24 26 29 31 31 Prepaid insurance for July through November, $2,000. Purchased office furniture for cash, $1,000. Performed services and received cash, $800. Paid advertising expense, $700. Performed service on account, $3,400. Purchased computer on account, $2,000. Collected for July 11 service. Paid account payable from July 19. Paid salary expense, $1,500. Adjusted for July insurance expense (see July 1). Earned revenue of $1,000 that was collected in advance back in June. Requirements 1. Show how each transaction would be handled using the cash basis and the accrual basis. 2. Compute July income (loss) before tax under each accounting method. 3. Indicate which measure of net income or net loss is preferable. Use the transactions on July 11

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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