Show how each transaction would be handled

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Reference no: EM132666365

Academic Consultants Inc. had the following selected transactions in August 2016:

Aug. 1      Prepaid insurance for August through December, $1,000

4            Purchased software for cash, $800

5            Performed service and received cash, $900

8           Paid advertising expense, $300

11         Performed service on account, $3,000

19         Purchased computer on account, $1,600

24        Collected for the August 11 service

26        Paid account payable from August 19

29        Paid salary expense, $900

31         Adjusted for August insurance expense (see Aug 1)

31          Earned revenue of $800 that was collected in advance in July

Problem 1: Show how each transaction would be handled using the cash basis and the accrual basis.

Problem 2: Compute August income (loss) before tax under each accounting method

Problem 3: Explain which measure of net income or net loss is preferable.

Reference no: EM132666365

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