Read each scenario, decide whether the company is using Cash basis or Accrual basis, and then enter your answer to the question.

The Purple Tulip Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $2,040 for six months of advertising. Purple Tulip Law Firm recorded $2,040 in the Prepaid Advertising account.

If Purple Tulip Law Firm had recorded their expenses using the other method, how much advertising expense would they have recorded for the two months ending February 28?

Sweet Catering completed the following selected transactions during May 2016:

• May 1: Prepaid rent for three months, $2,100
• May 5: Received and paid electricity bill, $90
• May 9: Received cash for meals served to customers, $2,520
• May 14: Paid cash for kitchen equipment, $3,770
• May 23: Served a banquet on account, $1,900
• May 31: Made the adjusting entry for rent (from May 1).
• May 31: Accrued salary expense, $2,290
• May 31: Recorded depreciation for May on kitchen equipment, $560 If Sweet Catering had recorded transactions using the Cash method, how much net income (loss) would they have recorded for the month of May? If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May?