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ID: 2566779 • Letter: #
Question
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21. Sooner Company has the following transactions: May 1 Customer ordered an installation service to be done on May 15 May 2 Customer paid cash for the installation job to be done on May 15 May 8 Sooner Company purchased installation supplies on account for the job on May 15 May 15 Sooner started and completed the installation job June 1 Sooner paid cash for the supplies that he picked up on May 8th Using the above transactions, please answer the following questions with the proper date: a. If Sooner uses the cash basis of accounting when would they recognize the expense of the supplies. b. If Sooner uses the accrual basis of accounting when would they recognize the revenue from the installation.
Explanation / Answer
a. If Cash Basis is used then the expense for supply woudl be recorded on June 1. T(he day payment is made)
b. If accrual basis of accouting is used then the revenue must be recognised on May 15 (The day jobis complete)
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