Identifying Transactions: Cash Versus Accrual Method

Identify which of the following events should be reported on financial statements under

1. the cash basis of accounting,

2. the accrual basis of accounting,

3. both methods, or

4. neither method.

Explain each choice.

a. Agreed (verbally) to purchase a used car from Slee-Z-Auto.

b. Paid $300 for a warranty on the used car.

c. Took the car on a test drive, found it faulty, and asked the salesperson for a different car.

d. The sales manager helped choose another car.

e. The sales manager kindly transferred the warranty to the second vehicle.

f. Paid $6,500 for the vehicle.

g. Paid license and taxes of $275.

h. Bought new tires for $450 on account.

i. On a cold winter morning, the car failed to start.

j. Purchased a new battery for $65 on account.

k. Filed a warranty claim for the new battery.

l. Received $45 payment under the warranty.