Pawn Shops Unlimited Recorded the Following Four Transactions During April

question 133

Multiple Choice

Pawn Shops Unlimited recorded the following four transactions during April.Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

• A)Purchased $500 of office supplies on account (supplies were used in May and paid for in May).
• B)Paid $1,800 for a six-month insurance policy covering the period July 1-December 31.
• C)Paid $700 for an advertisement that appeared in the May 17 edition of the Las Vegas Sun newspaper.

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Definitions:

Compounded Annually

The process where the interest earned in one period is added to the principal sum, and in the next period, interest is earned on the new principal.

Equal Annual Deposits

Regular payments of the same amount made into an account or investment annually.

Semiannual Deposits

Semiannual deposits refer to money deposits made twice a year into a financial account or investment.

Compound Interest

Interest that is computed on both the initial principal amount and the interest that has been added to that principal from past periods of a deposit or loan.