Question

Sweet Catering completed the following selected transactions during May 2016:May 1: Prepaid rent for three months, $2,400May 5: Received and paid electricity bill, $90May 9: Received cash for meals served to customers, $3,510May 14: Paid cash for kitchen equipment, $3,730May 23: Served a banquet on account, $1,520May 31: Made the adjusting entry for rent (from May 1).May 31: Accrued salary expense, $2,630May 31: Recorded depreciation for May on kitchen equipment, $560If 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

Answer:

See explanation below

Explanation:

• Computation of Net income/loss recorded for the month of May, using accrual method

Received cash for meals served to customers $3,510

+ Served a banquet on account $1,520

Total revenue $5,030

Less: expenses

(-) rent expense for May ($2,400/3) ($800)

(-) received and paid electricity bill ($90)

(-) accrued salary expense ($2,630)

(-) depreciation expense for May on kitchen equipment ($560)

Net income (revenue - expenses) $950

• Computation of Net income/loss recorded for the month of May, using cash method

Received cash for meals served to customers $3,510

(-) prepaid rent for three months ($2,400)

(-) received and paid electricity bill ($90)

(-) paid cash for kitchen equipment ($3,730)

Net loss ($2,710)