Sweet catering completed the following selected transactions during may 2016. May 1 prepaid rent for 3 months, 2,400, May 5: received and paid electricity bills 220, may 9: received cash for meals served to customers, $1, 650. May 14: paid cash for kitchen equipment 2,800 May 23: served a banquet on account 2,970. May 31: made the adjusting entry for rent (from May 1) May 31: Accrued salary expense 2,900. May 31: recorded depreciation for may on kitchen equipment 60. If Sweet Catering had recorded transaction using the cash method, how much net income (loss) would they have recorded for the month of may

Question

Fluffy

Business

24 January, 02:41

Sweet catering completed the following selected transactions during may 2016. May 1 prepaid rent for 3 months, 2,400, May 5: received and paid electricity bills 220, may 9: received cash for meals served to customers, $1, 650. May 14: paid cash for kitchen equipment 2,800 May 23: served a banquet on account 2,970. May 31: made the adjusting entry for rent (from May 1) May 31: Accrued salary expense 2,900. May 31: recorded depreciation for may on kitchen equipment 60. If Sweet Catering had recorded transaction using the cash method, how much net income (loss) would they have recorded for the month of may

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Giant · Answer 1

-$3,770

Explanation:

The computation of the net income or net loss using the cash method for May month is shown below:

= Received cash for meals served to customers - prepaid rent paid - electricity paid for cash - paid cash for kitchen equipment

= $1,650 - $2,400 - $220 - $2,800

= - $3,770

As the journal entry for prepaid rent is

Prepaid rent A/c Dr $2,400

To Cash A/c $2,400

(Being the cash is paid in advance)