On May 2, Johnson's Landscaping LLC paid $4,700 for repairs made to equipment during April. During May fuel costs for its machinery were $5,800 to be paid in June. Johnson's lawn mowers were depreciated for May by an amount of $1,000 using the straight-line method. What would be the company's equipment-related expenses for May under cash accounting and what would the expenses be under the accrual basis for May?

Question

Quizplus · Accepted Answer

Under cash accounting, expenses are recorded when paid, so only the $4,700 paid in May is recorded. Under accrual accounting, expenses are recorded when incurred, so the $5,800 fuel cost and $1,000 depreciation are recorded, totaling $6,800.

On May 2, Johnson's Landscaping LLC Paid $4,700 for Repairs