Hudson Tax Consulting had the following selected transactions in December:
Dec 1 Prepaid insurance for December through April, $3,500.
4 Purchased office furniture for cash, $900.
5 Performed services and received cash, $1,500.
8 Paid advertising expense, $140.
11 Performed service on account, $3,100.
19 Purchased computer on account, $2,800.
24 Collected for December 11 service.
26 Paid account payable from December 19.
29 Paid salary expense, $800.
31 Adjusted for December insurance expense (see December 1).
31 Earned revenue of $400 that was collected in advance back
31 Recorded December depreciation expense on all fixed assets, $210

1. Show how each transaction would be handled (in terms of revenue and expense recognition) using the cash basis and the accrual basis.
2. Compute December income (loss) before tax under each accounting method.
3. Indicate which measure of net income or net loss is preferable. Use the transactions on December 11 and December 24 to explain.

  • CreatedJuly 25, 2014
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