Problem:
Heaven's Golf School completed the following transactions during January:
January
1. Prepaid insurance for January through March, $300
4. Performed service (gave golf lessons) on account, $2,200
5. Purchased equipment on account, $1,900
8. Paid property tax expense, $450
11. Purchased office equipment for cash, $800
19. Performed service and received cash, $700
24. Collected $400 on account.
26. Paid account payable from January 5.
29. Paid salary expense, $900
31. Recorded adjusting entry for January insurance expense (see Jan. 1)
31. Debited unearned revenue and credited revenue to adjust the accounts, $600.
Requirements
1. Show how each transaction would be handled using the accrual basis of accounting. Give the amount of revenue or expense for January. Journal entries are not required.
2. Compute January net income or net loss under the accrual basis of accounting.
3. State why the accrual basis of accounting is preferable to the cash basis.