Question

Dannon Co. mistakenly reported its expenses of $35,200 on the cash basis. Corporate records revealed the following information:Beginning prepaid expense $1,300Beginning accrued expense 1,650Ending prepaid expense 1,800Ending accrued expense 1,200What amount of expense should Dannon report on its books under the accrual basis? a. $34,250b. $35,150c. $35,300d. $36,150

Answer 1

Answer:

amount of expense report = 34,250

so correct option is a. $34,250

Explanation:

given data  

expenses on cash basis  =  $35,200

Beginning prepaid expense =  $1,300

Beginning accrued expense = 1,650

Ending prepaid expense = 1,800

Ending accrued expense = 1,200

to find out

amount of expense report on books under accrual basis

solution

we know that accrual basis reflect expenses incurred during the period while cash basis reflect expenses actually paid during the year in cash

so

Expense on Cash basis is $35,200

and

Increase in prepaid expenses = expenses paid for next period

= $1800 - $1300  =  $500

and

Decrease in Accrued Expenses =  expenses paid of earlier period

= $1650 - $1200  = $450

so

amount of expense report on books under accrual basis is

amount of expense report =  35,200 - 500 - 450

amount of expense report = 34,250

so correct option is a. $34,250