Academic Consultants Inc

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

 

ug. 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.

 

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

Under each column, give the amount of revenue or expense for August. Journal entries are not required. Use the following format for your answer and show your computations.

Academic Consultants Inc.

Amount of Revenue (Expense) for August 2016.

Date

Cash Basis

 

Accrual Basis

 

Aug 1

Revenue / (Expenses)

Amount

Revenue / (Expenses)

Amount

 

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

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