E3-6 ldentifying Accrual Basis Expenses [LO 3-1, LO 3-2] Under accrual basis acc
ID: 2339409 • Letter: E
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E3-6 ldentifying Accrual Basis Expenses [LO 3-1, LO 3-2] Under accrual basis accounting, expenses are recognized when incurred, which means the activity giving rise to the expense has occurred. Assume the following transactions occurred in January: Required: For each of the transactions, if an expense is to be recognized in January, indicate the amount. Activity Amount Dugg paid its computer service technicians $108,500 in salary for work done irn January. Answer from Dugg's standpoint. h. At the beginning of January, Tuner Construction Company paid $4,200 in rent b. | for February-Apri McGraw-Hill Education-publisher of this textbook-used $5,550 worth of electricity and natural gas in January, which it has not paid or recorded Pooler Company received and paid in January a $3,700 invoice from a consulting firm for services received in January The campus bookstore received consulting services at a cost of $7,550. The terms indicate that payment is due within 30 days of the consultation. Schergevitch Incorporated had its delivery van repaired in January for $640 and charged the amount on account.Explanation / Answer
S.No Amount to be recogniized in January Explanation a. $108,500 Since the event (work done) is occured in January b. $0 Since the event giving rise to the rent expense has not yet occured. Rent expenses has to be recognized evenly in the months February to April. c. $5,500 Since the event (Usage) is occured in January d. $3,700 Since the event (Services received) is occured in January e. $7,550 Lets assume that the campus bookstore received consulting services in January. Since the event (Services received) is occured in January, consultancy expanse has to be recognized in Jnauary. f. $640 Since the event (Repairs) is occured in January
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