Reference no: EM132815546

Susie has just started selling umbrellas and sun hats from a rolling kiosk in the French Quarter of New Orleans. A family friend sells the umbrellas to Susie for $5 each. He will also wait until the 10th of each month for payment on the previous month's purchases. Susie buys the sun hats from another supplier for $3 each, but has to pay cash on delivery. She sells the umbrellas for $15 each and the sun hats for $10 each.

• During her first week of operations, Susie buys 50 umbrellas and 50 sun hats. Her brother took 10 umbrellas to give to the people who work for him and promises to pay Susie next week. It was a very rainy week, so Susie sold the rest of the umbrellas, but only 10 sun hats.

Problem 1: What is Susie's profit or loss for the week using cash-basis accounting? Show your calculations.

Problem 2: What is Susie's profit or loss for the week using accrual accounting? Show your calculations.

Problem 3: Which method provides Susie with the most useful information and why?

Problem 4: When Susie counts the cash left at the end of the week from these transactions, she has a total of $545. How can this be?