Consider the following transactions:

The company uses supplies purchased in the previous period, $1,500.

The company pays cash for rent in advance, $6,000.

The company repays a loan to the bank, $10,000 (ignore any interest cost).

The amount of accrual-basis expense is ________ while the amount of cash-basis expense is ________.

A) $6,000; $11,500

B) $6,000; $16,000

C) $1,500; $16,000

D) $1,500; $6,000

Answer: D

Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement

Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

A) Received $600 from customers for services to be provided in May.

B) Paid $1,800 for a six-month insurance policy covering the period July 1—December 31.

C) Paid $700 for an advertisement that appeared in the April 17 edition of the Las Vegas Sun newspaper.

D) Received $300 from customers for services performed in March.

Ch3 answer: C

A company paid $900 to workers during May. Of this amount, $600 was for work performed in April, while the other $300 was for work performed during May. What would the impact of this transaction be during May on (1) the balance of cash, (2) cash-basis net income, and (3) accrual-basis net income?

A) (1) No effect, (2) No effect, (3) Decrease.

B) (1) Decrease, (2) Decrease, (3) No effect.

C) (1) Decrease, (2) Decrease, (3) Decrease.

D) (1) Decrease, (2) No effect, (3) No effect.

Ch3 answer: C