Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 3: Q. 3-1SE-a (page 157)

The Pink Peonies Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $3,000 for 10 months of advertising. How much advertising expense should Pink Peonies Law Firm record for the two months ending February 28 under the a. cash basis? b. accrual basis?

Short Answer

Expert verified

Advertising expense equals $3,000.

Step by step solution

01

Explanation on Cash Basis Accounting

Cash basis accounting records the revenues and expenses on the basis cash receipts or payments.

02

Explanation on Advertising Expense

In the given case, firm paid $3,000 for advertising expense for ten months in cash. As per cash basis accounting, total $3,000 will be treated as advertising expense.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question :Chef ’s Catering completed the following selected transactions during May 2018: Learning Objectives 1, 2 Learning Objectives 1, 2 > Exercises May 1 Prepaid rent for three months, \(2,400. 5 Received and paid electricity bill, \)700. 9 Received cash for meals served to customers, \(2,600. 14 Paid cash for kitchen equipment, \)3,000. 23 Served a banquet on account, \(2,800. 31 Made the adjusting entry for rent (from May 1). 31 Accrued salary expense, \)1,600. 31 Recorded depreciation for May on kitchen equipment, \(50. Date May 1 \)(2,400) $0 Cash Basis Amount of Revenue (Expense) Accrual Basis Amount of Revenue (Expense) Amount of Revenue (Expense) for May Requirements 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the following table. (Expenses should be shown in parentheses.) Also, indicate the dollar amount of the revenue or expense. The May 1 transaction has been completed as an example. 2. After completing the table, calculate the amount of net income or net loss for Chef ’s Catering under the accrual basis and cash basis accounting systems for May. 3. Considering your results from Requirement 2, which method gives the best picture of the true earnings of Chef ’s Catering? Why?

Which accounting concept or principle requires companies to divide their activities into small time segments such as months, quarters, or years?

Question :Seacoast Magazine sells subscriptions for $36 for 18 issues. The company collects cash in advance and then mails out the magazines to subscribers each month. Apply the revenue recognition principle to determine a. when Seacoast Magazine should record revenue for this situation. b. the amount of revenue Seacoast Magazine should record for eight issues.

On November 1, Carlisle Equipment had a beginning balance in the Office Supplies account of \(600. During the month, Carlisle purchased \)2,300 of office supplies. At November 30, Carlisle Equipment had $500 of office supplies on hand. Requirements 1. Open the Office Supplies T-account, and enter the beginning balance and purchase of office supplies. 2. Record the adjusting entry required at November 30. 3. Post the adjusting entry to the two accounts involved, and show their balances at November 30.

Question :The following data at July 31, 2018, are given for RCO: a. Depreciation, \(600. b. Prepaid rent expires, \)200. c. Interest expense accrued, \(700. d. Employee salaries owed for Monday through Thursday of a five-day workweek; weekly payroll, \)8,000. Unearned revenue earned, \(1,000. f. Office supplies used, \)150. Requirements 1. Journalize the adjusting entries needed on July 31, 2018. 2. Suppose the adjustments made in Requirement 1 were not made. Compute the overall overstatement or understatement of net income as a result of the omission of these adjustments
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Strategic Analysis

Read Explanation

Introduction to Business

Read Explanation

Intermediate Accounting

Read Explanation

Financial Performance

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free