Chapter 3, Problem 38E

Exercise 3-38 Accrual- and Cash-Basis Expense Recognition

The following information is taken from the accrual accounting records of Kroger Sales Company:

1. During January, Kroger paid $9,150 for supplies to in sales to customers during the next 2 months (February and March). The supplies will be used evenly over the next 2 months.
2. Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively.
3. Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April.

Required:

1. Under cash-basis accounting, how much exvxn.se should Kroger report for February and March?
2. Under accrual-basis accounting, how much expense should Kroger report for February and March?
3. CONCEPTUAL CONNECTION Which basis of accounting provides the most useful information for decision-makers? Why?