Chapter 5, Problem 8E

Considering the following events, determine which month the revenue or expenses would be recorded using the accounting method specified.

1. a. Gerber Company uses the cash basis of accounting. Gerber prepays cash in May for insurance that only covers the following month, (June).
2. b. Matthews and Dudley Attorneys uses the accrual basis of accounting. Matthews and Dudley Attorneys receives cash from customers in June for services to be performed in July.
3. c. Eckstein Company uses the accrual basis of accounting. Eckstein prepays cash in October for rent that covers the following month, (October).
4. d. Gerbino Company uses the cash basis of accounting. Gerbino makes a sale to a customer in February but does not expect payment until March.