Accrual- and Cash-Basis Expense Recognition The following information is taken f

Question

Accrual- and Cash-Basis Expense Recognition The following information is taken from the accrual accounting records of Kroger Sales Company: During January, Kroger paid $9,150 for supplies to be used in sales to customers during the next 2 months (February and March). The supplies will be used evenly over the next 2 months. Kroger pays its employees at the end of each month for salaries earned during that month. Salaries paid at the end of February and March amounted to $4,925 and $5,100, respectively. Kroger placed an advertisement in the local newspaper during March at a cost of $850. The ad promoted the pre-spring sale during the last week in March. Kroger did not pay for the newspaper ad until mid-April. Under cash-basis accounting, how much expense should Kroger report for February and March? Under accrual-basis accounting, how much expense should Kroger report for February and March? Conceptual Connection: Which basis of accounting provides the most useful information for decision-makers? Why? The input in the box below will not be automatically graded, but may be reviewed and considered by your instructor.

Explanation / Answer

1.      February cash-basis expenses = $4,925

               2.      February accrual-basis expenses = $9,500

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