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Accrual- and Cash-Basis Revenue




1. Accrual- and Cash-Basis Revenue;Magnani Music sells used CDs for $2.00 each. During the month of April, Magnani sold 8,750 CDs for cash and 15,310 CDs on credit. Magnani's cash collections in April included the $17,500 for the CDs sold for cash, $10,300 for CDs sold on credit during the previous month, and $9,850 for CDs sold on credit during April.;2. Speedy Delivery Company provides next-day delivery across Eastern Canada. During May, Speedy incurred $132,600 in fuel costs. Speedy paid $95,450 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort to build up its supply of fuel.;3. The following information describes transactions for Morgenstern Advertising Company during July;On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Ltd. During July, Morgenstern paid $20,500 cash to Drexel and used $18,450 of the supplies.;Morgenstern paid $9,600 to salespeople for salaries earned during July. An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month.;Paid $2,950 to the local utility company for electric service. Electric service in July was $2,300 of the $2,950 total bill.;for 1-3 question required;Calculate the amount of revenue recognized in April under the cash basis of accounting.;Calculate the amount of revenue recognized in April under the accrual basis of accounting.;4.Accrual- and Cash-Basis Expense Recognition;The following information is taken from the accrual accounting records of Kroger Sales Company;During January, Kroger paid $9,150 for supplies to be used in sales to customers during the next two months (February and March). The supplies will be used evenly over the next two months.;Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively.;Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April.;Required;1. Under cash-basis accounting, how much expense should Kroger report for February and March?;February $;March $;2. Under accrual-basis accounting, how much expense should Kroger report for February and March?;February $;March $;3. Conceptual Connection: Which basis of accounting provides the most useful information for decision makers?;Why?


Paper#23971 | Written in 18-Jul-2015

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