Cornerstone Brief exercise 3-29 Hi, I am stuck on how to solve the problem attached. Could you please help me figure it out?
Cornerstone Brief exercise 3-29 Hi, I am stuck on how to solve the problem attached. Could you please help me figure it out?
Century 21 Accounting Multicolumn Journal
11th Edition
ISBN:9781337679503
Author:Gilbertson
Publisher:Gilbertson
Chapter10: Accounting For Sales And Cash Receipts
Section: Chapter Questions
Problem 1MP
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Cornerstone Brief exercise 3-29 Hi, I am stuck on how to solve the problem attached. Could you please help me figure it out?
![**Brief Exercise 3-29 (Algorithmic)**
Revenue and Expense Recognition
Lauhl Corporation provides janitorial services to several office buildings. During April, Lauhl engaged in the following transactions:
a. On April 1, Lauhl received $51,600 from Metro Corporation to provide cleaning services over the next 6 months.
b. On April 5, Lauhl purchased and received $8,500 of supplies on credit from Eagle Supply Company. During the month, Lauhl paid $5,000 to Eagle and used $1,300 of the supplies.
c. On April 20, Lauhl performed one-time cleaning services of $4,500 for Jones Company. Jones paid Lauhl the full amount on May 10.
d. On April 30, Lauhl paid employees wages of $7,400. An additional $850 was owed to employees for work performed in April.
**Required:**
1. Calculate the amount of net income that Lauhl should recognize in April under cash-basis accounting.
[Blank Space for Answer]
2. Calculate the amount of net income that Lauhl should recognize in April under accrual-basis accounting.
[Blank Space for Answer]
**Explanation:**
- Cash-basis accounting recognizes revenues and expenses only when cash is received or paid.
- Accrual-basis accounting recognizes revenues when they are earned and expenses when they are incurred, regardless of when cash transactions occur.
This exercise helps in understanding the differences between cash-basis and accrual-basis accounting.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F132dff69-7375-451f-a31f-25a6d15945d4%2Fa313e135-6000-4388-bc78-17b4b11228a4%2Fgql1ptu_processed.png&w=3840&q=75)
Transcribed Image Text:**Brief Exercise 3-29 (Algorithmic)**
Revenue and Expense Recognition
Lauhl Corporation provides janitorial services to several office buildings. During April, Lauhl engaged in the following transactions:
a. On April 1, Lauhl received $51,600 from Metro Corporation to provide cleaning services over the next 6 months.
b. On April 5, Lauhl purchased and received $8,500 of supplies on credit from Eagle Supply Company. During the month, Lauhl paid $5,000 to Eagle and used $1,300 of the supplies.
c. On April 20, Lauhl performed one-time cleaning services of $4,500 for Jones Company. Jones paid Lauhl the full amount on May 10.
d. On April 30, Lauhl paid employees wages of $7,400. An additional $850 was owed to employees for work performed in April.
**Required:**
1. Calculate the amount of net income that Lauhl should recognize in April under cash-basis accounting.
[Blank Space for Answer]
2. Calculate the amount of net income that Lauhl should recognize in April under accrual-basis accounting.
[Blank Space for Answer]
**Explanation:**
- Cash-basis accounting recognizes revenues and expenses only when cash is received or paid.
- Accrual-basis accounting recognizes revenues when they are earned and expenses when they are incurred, regardless of when cash transactions occur.
This exercise helps in understanding the differences between cash-basis and accrual-basis accounting.
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