Let's break down the question and transactions using **accrual basis accounting**. Under the **accrual basis**, expenses are recognized when they are **incurred**, regardless of when cash is paid. ### Transactions: a. Paid $6,000 for insurance for the next 12 months. - Only **1 month** of insurance is an expense for this month: $6,000 / 12 = **$500** b. Received $1,200 for services to be performed over the next 6 months. - This is revenue, **not an expense**. c. Paid $900 for **current month’s rent**. - Entire $900 is an expense for this month: **$900** d. Paid $350 cash for **office supplies**. - Office supplies are generally expensed when used. Assume all are used this month (since not specified): **$350** e. Paid $650 in **Salaries Expense**. - Salaries expense for this month: **$650** f. Received $1,900 in cash for service revenue earned this month. - This is revenue, **not an expense**. --- ### Total Expenses (Accrual Basis): - Insurance Expense: $500 - Rent Expense: $900 - Office Supplies Expense: $350 - Salaries Expense: $650 **Total = $500 + $900 + $350 + $650 = $2,400** However, this doesn't match any options, so let's review the office supplies: If not all supplies are used, but since the problem doesn't specify, it's reasonable to assume they were all used. Let's check the closest answer choice, which is **B. $2,050**. Let's see if insurance should be considered differently: - Insurance expense for one month: $500 - Rent: $900 - Supplies: $350 - Salaries: $650 Total: $500 + $900 + $350 + $650 = $2,400 If **supplies were not all used**, and none were expensed, our total would be $2,050 (excluding $350). ### **Final Summary** - **Accrual basis** recognizes expenses when incurred. - **Insurance:** Only 1 month's worth expensed: $500 - **Rent:** $900 - **Supplies:** If all used, $350; if not, then $0 (but normally expensed when purchased unless stated otherwise). - **Salaries:** $650 - **Revenues received are not expenses.** **The correct answer is likely B. $2,050** (assuming supplies were not all used this month, which matches the answer choices). **Final Answer:** **B. $2,050** This includes only the portion of prepaid insurance applicable to the month, rent, and salaries expense. Supplies are likely not fully expensed unless used.

Let's carefully re-examine the transactions and calculations based on accrual accounting principles: ### Given Transactions: 1. **Paid $6,000 for insurance for 12 months** - Monthly insurance expense = $6,000 / 12 = **$500** - For this month, insurance expense = **$500** 2. **Received $1,200 for services to be performed over 6 months** - This is unearned revenue; it does not affect expenses directly this month. - Revenue recognition will occur over time, but for expenses, no impact. 3. **Paid $900 for current month's rent** - Rent expense for this month = **$900** 4. **Paid $350 cash for office supplies** - Assuming supplies are used this month, expense = **$350** - If supplies are not yet used, they would be an asset, but generally, unless specified, we assume full consumption. 5. **Paid $650 in salaries** - Salaries expense for this month = **$650** 6. **Received $1,900 cash for services performed this month** - Revenue, not an expense; no effect on expense calculation. --- ### Total Expenses (accrual basis): | Expense Item | Amount | |----------------------------------|---------| | Insurance (1 month) | $500 | | Rent | $900 | | Office supplies | $350 | | Salaries | $650 | | **Total Expenses** | **$2,400** | ### Comparing with provided options: Options provided are: - A. 2000 - B. 2050 - C. 2200 - D. 2250 Our calculated total is **$2,400**, which exceeds all options, indicating perhaps some adjustment or assumptions. --- ### Possible adjustments: - **Supplies**: If supplies were **not used this month**, then they wouldn't be expensed yet, reducing total expenses by $350: - Total without supplies = $2,400 - $350 = **$2,050** This matches option **B. 2050**. ### Final conclusion: - The most reasonable assumption is that supplies are **not yet used or expensed** this month, so the expenses total **$2,050**. --- ## **Final Summary:** Under **accrual basis** accounting, expenses are recognized when incurred, regardless of cash flow. - Insurance expense: $500 (for 1 month out of 12) - Rent expense: $900 - Salaries expense: $650 - Office supplies: **assumed not yet used** this month, so not expensed this period. **Total expenses for the month: $2,050** **Correct Answer: B. 2050**