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  • 2 Cash Basis 3 400 Fantastic Catering Completed The Following Selected Transactions

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    hassan taimour
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    Fantastic Catering completed several transactions in May 2016, including prepaying rent, paying utility bills, receiving cash from customers, purchasing kitchen equipment, serving a banquet, and accruing salary and depreciation expenses. Under the cash basis, Fantastic Catering had a net loss of $400, while under the accrual basis they had net income of $1,300 due to the difference in how prepaid rent and accrued expenses are treated. The accrual basis provides a better picture of the company's true earnings for the period.

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    2 Cash Basis 3 400 Fantastic Catering Completed the Following Selected Transactions

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    Fantastic Catering completed several transactions in May 2016, including prepaying rent, paying utility bills, receiving cash from customers, purchasing kitchen equipment, serving a banquet, and accruing salary and depreciation expenses. Under the cash basis, Fantastic Catering had a net loss of $400, while under the accrual basis they had net income of $1,300 due to the difference in how prepaid rent and accrued expenses are treated. The accrual basis provides a better picture of the company's true earnings for the period.

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    © All Rights Reserved
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    15 views1 page

    2 Cash Basis 3 400 Fantastic Catering Completed The Following Selected Transactions

    Uploaded by

    hassan taimour
    Fantastic Catering completed several transactions in May 2016, including prepaying rent, paying utility bills, receiving cash from customers, purchasing kitchen equipment, serving a banquet, and accruing salary and depreciation expenses. Under the cash basis, Fantastic Catering had a net loss of $400, while under the accrual basis they had net income of $1,300 due to the difference in how prepaid rent and accrued expenses are treated. The accrual basis provides a better picture of the company's true earnings for the period.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    2 Cash basis 3 400 Fantastic Catering completed the

    following selected transactions #354


    2. Cash basis $(3,400) Fantastic Catering completed the following selected transactions during
    May 2016:May 1 Prepaid rent for three months, $1,800.5 Received and paid electricity bill,
    $200.9 Received cash for meals served to customers, $ 1,900.14 Paid cash for kitchen
    equipment, $3,300.23 Served a banquet on account, $3,600.31 Made the adjusting entry for
    rent (from May 1).31 Accrued salary expense, $1,300.31 Recorded depreciation for May on
    kitchen equipment, $55.Requirements1. Show whether each transaction would be handled as a
    revenue or an expense using both the cash basis and accrual basis accounting systems by
    completing the following table. (Expenses should be shown in parentheses.) Also, indicate the
    dollar amount of the revenue or expense. The May 1 transaction has been completed as an
    example.2. After completing the table, calculate the amount of net income or net loss for
    Fantastic Catering under the accrual basis and cash basis accounting systems for May.3.
    Considering your results from Requirement 2, which method gives the best picture of the true
    earnings of Fantastic Catering? Why?View Solution:
    2 Cash basis 3 400 Fantastic Catering completed the following selected transactions

    ANSWER
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