Question

Sweet Catering completed the following selected transactions during May 2016: May 5: Received and paid electricity bill, $80 May 9: Received cash for meals served to customers, $570 May 23: Served a banquet on account, $2,790 May 31: Accrued salary expense, $1,310 May 31: Recorded prepaid insurance expired, $290 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. 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.

Answer 1

Cash method

Income statement

Cash received from customer	570
Paid electricity bill	-80
Net income	$490

Net income (Cash method ) = $490

Accrual method

Income statement

Sales revenue	570
Service revenue	2,790
Total revenue	3,360
Expenses :
Electricity expense	-80
Salary expense	-1,310
Insurance expense	-290
Net income	$1,680

Net income (Accrual method) = $1,680

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