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Cash vs. Accrual Basis Exercise

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Please in the attached file, identify the transactions as cash or accrual basis. Enter expenses in parenthesis or with a negative sign. Enter 0 if there is nothing to record on a specific date.

Company X completed the following selected transactions during May 16:

• May 1: Prepaid rent for three months, $1,200
• May 5: Received and paid electricity bill, $210
• May 9: Received cash for meals served to customers, $2,400
• May 14: Paid cash for kitchen equipment, $2,900
• May 23: Served a banquet on account, 2,700
• May 31: Made the adjusting entry for rent (from May 1)
• May 31: Accrued salary expense, $1,900
• May 31: Recorded depreciation for May on kitchen equipment, $670

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Solution Summary

This solution illustrates how to record transactions on the cash basis and on the accrual basis. It includes journal entries and the impact of each transaction on revenues and expenses under each basis.

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