Question: Ruiz Consulting had the following selected transactions in October October

Ruiz Consulting had the following selected transactions in October:
October 1 Prepaid insurance for October through December, $2,000.
4 Purchased office furniture for cash, $8,000.
5 Performed services and received cash, $1,700.
8 Paid advertising expense, $700.
11 Performed service on account, $6,400.
19 Purchased computer on account, $2,000.
24 Collected for October 11 service.
26 Paid account payable from October 19.
29 Paid salary expense, $1,500.
31 Adjusted for October insurance expense (see October 1).
31 Earned revenue of $1,000 that was collected in advance back
31 Recorded October depreciation expense on all fixed assets, $ September.

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

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  • CreatedJuly 25, 2014
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