Reference no: EM132584915
Academic Consultants Inc. had the following selected transactions in August 2016:
Aug. 1
Prepaid insurance for August through December $1,000
Aug. 4
Purchased software for cash $800
Aug. 5
Performed service and received cash $900
Aug. 8
Paid advertising expense $300
Aug. 11
Performed service on account $3,000
Aug. 19
Purchased computer on account $1,600
Aug. 24
Collected for the August 11 service
Aug. 26
Paid account payable from August 19
Aug. 29
Paid salary expense $900
Aug. 31
Adjusted for August insurance expense (see Aug 1)
Aug. 31
Earned revenue of $800 that was collected in advance in July.
Question 1 Show how each transaction would be handled using the cash basis and the accrual basis.
Question 2 Compute August income (loss) before tax under each accounting method.
Question 3 Explain which measure of net income or net loss is preferable.