The following information describes transactions for Morgenstern Advertising Com
ID: 2379968 • Letter: T
Question
The following information describes transactions for Morgenstern Advertising Company during July: a. On July 5, Morgenstern purchased and received $24,300 of supplies on credit from Drexel Supply Inc. During July, Morgenstern paid $20,500 cash to Drexel and used $18,450 of the supplies. b. Morgenstern paid $9,600 to salespeople for salaries earned during July. An additional $1,610 was owed to salespeople at July 31 for salaries earned during the month. c. Paid $2,950 to the local utility company for electric service. Electric service in July was $2,300 of the $2,950 total bill.
Required: Calculate the amount of expense recognized in July under
(1) cash-basis accounting
(2) accrual-basis accounting
Explanation / Answer
Cash basis of accounting Debit Credit a Purchases $20,500 To cash $20,500 b Salaries $9,600 To cash $9,600 c Electric service $2,300 To cash $2,300
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