The Following Selected Transactions Occurred During May for Guido's Accounting

Essay

The following selected transactions occurred during May for Guido's Accounting Services.
May 1 The firm received and recorded a $450 receipt from a customer for accounting services to be rendered evenly in May, June and July.
May 1 The firm paid $900 for a four-month insurance policy. Coverage begins on May 1.
May 4 The firm paid $800 to a data processing firm for work that will be performed evenly in May and June.
May 31 The firm's employees earn $250 of wages daily, based on a five-day work week. Employees are paid each Friday for the week just worked. May 31 falls on a Wednesday.
May 31 The firm recorded its $170 estimated utility bill for May.
May 31 The firm's computer cost $5,180 when it was purchased last year. At that time, the computer's life was expected to be three years, with an expected salvage value of $500. The firm recorded one month's depreciation on the computer.
May 31 On May 1, the office supplies account showed a balance of $120 of office supplies on hand. During May, the firm bought $250 of office supplies. On this date, $280 of office supplies were counted in the supply cabinet. The firm recorded the supplies used for the month.
Required:
A) Prepare the entries on May 1 and May 4. Next to each account title, indicate whether that account will increase (+) or decrease (-) as a result of the transaction.
B) Prepare all necessary adjusting journal entries for Guido's Accounting Services on May 31. Next to each account title, indicate whether that account will increase (+) or decrease (-) as a result of the transaction.
C) Assume that Guido's Accounting Services uses the cash basis of accounting instead of the accrual basis. For each transaction, indicate how the firm's revenues and expenses for May would have been affected.