Effects of Transactions: Cash Versus Accrual
Consider the following transactions or events:
1. Sold merchandise on account.
2. Sold a used computer for cash.
3. Paid a supplier’s overdue account.
4. Recorded depreciation expense on a building.
5. Signed a mortgage and received cash.
6. Purchased inventory on account.
7. Gave a refund after hearing a customer’s complaint.
8. Received payment from a customer.
9. Sold shares of IBM stock for cash and recorded a gain.
10. Recorded a loss after discarding obsolete inventory.
11. Received a personal cash gift from a friend.
12. Made an “even” swap of a used truck for another truck.
13. Paid quarterly unemployment taxes.
14. Received a tax refund after sending duplicate checks to the IRS.
Required
a. Show the effects on cash of each transaction or event, using the format below:
|
Effects on Cash |
||
|
Increase |
Decrease |
No Change |
b.Show the effects of each transaction or event on net income, using a similar format:
|
Effects on Net Income |
||
|
Increase |
Decrease |
No Change |