Question

The following information describes transactions for Morgenstern Advertising Company during July: a. On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc. During July, Morgenstern paid $20,500 cash to Drexel and used $18,450 of the supplies. b. Morgenstern paid $9,600 to salespeople for salaries earned during July. An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month. c. Paid $2,950 to the local utility company for electric service. Electric service in July was $2,300 of the $2,950 total bill.Required: Calculate the amount of expense recognized in July under(1) cash-basis accounting(2) accrual-basis accounting

Answer 1

Answer:

Explanation:

The following information describes transactions for Morgenstern Advertising Company during July: a. On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc. ACCRUAL

During July, Morgenstern paid $20,500 cash to Drexel and used $18,450 of the supplies. CASH

b. Morgenstern paid $9,600 to salespeople for salaries earned during July. CASH/ACCRUAL

An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month. ACCRUAL

c. Paid $2,950 to the local utility company for electric service. CASH

Electric service in July was $2,300 of the $2,950 total bill. ACCRUAL

CASH BASIS

1. During July, Morgenstern paid $20,500 cash to Drexel for supplies

2. Morgenstern paid $9,600 to salespeople for salaries

3. Paid $2,950 to the local utility company for electric service

Expenses

Supplies .........20,500

Salaries.............9,600

Electric Bill........2,950

Total                33,050

ACCRUAL BASIS

1. On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc

2. b. Morgenstern paid $9,600 to salespeople for salaries earned during July. CASH/ACCRUAL

3. An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month. ACCRUAL

4. Electric service in July was $2,300 of the $2,950 total bill. ACCRUAL

Expenses

Supplies ..........................24,300

Salaries....(9,600+1,610) 11,210

Electric Bill........................2,300

Total                              37,810