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

1.The Johnny Flowers Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $1,760 for six months of advertising. Johnny Flowers Law Firm recorded $1,760 in the Prepaid Advertising account.

Accrual basis or Cash basis _________________

2. If Johnny Flowers 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? Enter this value as a positive number. _________________

3. Safe Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Safe Home has collected $2,200 from cash-paying customers. Safe Home's remaining customers owe the business $3,710. Safe Home recorded $2,200 of service revenue for the year. Accrual basis or Cash basis _________________

4. If Safe Home had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? ____________________________

5. Momentous Occasions received $3,810 for services to be performed for the next 8 months on March 31 and recorded this transaction using the Unearned Revenue account. Accrual basis or Cash basis _________________

6. If Momentous Occasions had recorded their service revenue using the other method, how much service revenue would they have recorded for the year? ____________________

-Sweet Catering completed the following selected transactions during May 2016:

• May 1: Prepaid rent for three months, $2,400
• May 5: Received and paid electricity bill, $80
• May 9: Received cash for meals served to customers, $1,650
• May 14: Paid cash for kitchen equipment, $2,030
• May 23: Served a banquet on account, $2,790
• May 31: Made the adjusting entry for rent (from May 1).
• May 31: Accrued salary expense, $3,070
• May 31: Recorded depreciation for May on kitchen equipment, $570

7. 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 there is a loss, enter it with parentheses or a negative sign. ___________________

8. If Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a loss, enter it with parentheses or a negative sign. _____________________

9. Identify whether each account would appear on the Balance Sheet or the Income Statement.

Common Stock ______________

Retained Earnings _________________

Accumulated Depreciation - Truck _______________

Rent Expense _______________

Furniture _____________

Land ____________