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- Case 3-72 Cash- or Accrual-Basis Accounting Karen Ragsdale owns a business that rents parking spots to students at the local university. Karens typical rental contract requires the student to pay the years rent of $450 ($50 per month) on September 1. When Karen prepares financial statements at the end of December, her accountant requires that Karen spread the $450 over the 9 months that each parking Spot is rented. Therefore, Karen can recognize only $200 of revenue (4 months) from each parking spot rental contract in the year the cash is collected and must defer (delay) recognition of the remaining $250 (5 months) to the next year. Karen argues that getting students to agree to rent the parking Spot is the most difficult part of the activity so she Ought to be able to recognize all $450 as revenue when the cash is received from a student. Required: Why do generally accepted accounting principles require the use of accrual accounting rather than cash-basis accounting for transactions like the one described here?SERIES A PROBLEMS THE ACCOUNTING EQUATION Dr. John Salvaggi is a chiropractor. As of December 31, he owned the following property that related to his professional practice. REQUIRED 1. From the preceding information, compute the accounting elements and enter them in the accounting equation shown as follows. 2. During January, the assets increase by 8,540, and the liabilities increase by 3,360. Compute the resulting accounting equation. 3. During February, the assets decrease by 3,460, and the liabilities increase by 2,000. Compute the resulting accounting equation.Transactions; financial statements 2. Net income: 10,850 On April 1, 20Y8, Maria Adams established Custom Realty. Maria completed the following transactions during the month of April: a. Opened a business bank account with a deposit of 24,000 in exchange for common stock. b. Paid rent on office and equipment for the month, 3,600. c. Paid automobile expenses for month, 1,350, and miscellaneous expenses, 600. d. Purchased supplies on account, 1,200. e. Earned sales commissions, receiving cash, 19,800. f. Paid creditor on account, 750. g. Paid office salaries, 2,500. h. Paid dividends, 3,500. i. Determined that the cost of supplies on hand was 300; therefore, the cost of supplies used was 900. Instructions 1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings: 2. Prepare an income statement for April, a statement of stockholders equity for April, and a balance sheet as of April 30.
- STATEMENT OF OWNERS EQUITY REPORTING NET LOSS Based on the information provided in Exercise 2-6B, prepare a statement of owners equity assuming Lopez had a net loss of 2,000. STATEMENT OF OWNERS EQUITY REPORTING NET INCOME Efran Lopez started a financial consulting service on June 1, 20--, by investing 15,000. His net income for the month was 6,000, and he withdrew 7,000 for personal use. Prepare a statement of owners equity for the month of June.STATEMENT OF OWNERS EQUITY REPORTING NET INCOME Betsy Ray started an accounting service on June 1, 20--, by investing 20,000. Her net income for the month was 10,000, and she withdrew 8,000. Prepare a statement of owners equity for the month of June. STATE MENT OF OWNER S EQUITY REPORTING NET LO SS Based on the information provided in Exercise 2-6A, prepare a statement of owners equity assuming Ray had a net loss of 3,000.Complete instructions 4-10. For the past several years, Jolene Upton has operated a part-time consulting businessfrom her home. As of July 1, 2019, Jolene decided to move to rented quarters and to operate the business, which was to be known as Gourmet Consulting, on a full-time basis. Gourmet Consulting entered into the following transactions during July: July 1. The following assets were received from Jolene Upton: cash, $19,000; accounts receivable, $22,300; supplies, $3,800; and office equipment, $8,900. There were no liabilities received.1. Paid three months’ rent on a lease rental contract, $6,000.2. Paid the premiums on property and casualty insurance policies, $4,500.4. Received cash from clients as an advance payment for services to be providedand recorded it as unearned fees, $8,000.5. Purchased additional office equipment on account from Office Necessities Co., $5,100.6. Received cash from clients on account, $12,750.10. Paid cash for a newspaper advertisement, $500.12. Paid…
- Problem 4 On October 1,2019 Cristia Spa Service. She owns a proprietorship. During the first 10 days of operation the business the business complete his transaction. To begin operations, Cristia deposits 100,000 personal funds in the bank account titled Cristia’s Spa Service . The business receives the cash and gives Cristia’s Capital Owner’s Equity. October 2 - Pays P20,000 cash for a small building to be used as an office. October 4- Purchases office supplies for P 350 on account October 10- Pays cash of P5,000 for office furniture October12- Pays P 250 on the account payable transaction October 14- Withdraws P2,000 cash for personal use October 30 Withdraws another 1,500 cash for personal use Requirement : a. General journal b. T- Account c. Trial balanceQuestion Case 1: Real Estate Agency Oct. 1 Ms. Lea begins business as a real estate agent with a cash investment of P1,500,000. 2 Paid rent, P35,000, on office space. 3 Purchased office equipment for P140,000 on account. 6 Sold a house and lot for Mr. Smith; billed Mr. Smith P220,000 for realty services performed. 27 Paid P55,000 on the balance related to the transaction of October 3. 30 Received bill for October utilities, P6,500 (not paid at this time). Requirement: Journalize the transactions. Explanations can be omitted.Case 1: Real Estate Agency Oct. 1 Ms. Lea begins business as a real estate agent with a cash investment of P1,500,000. 2 Paid rent, P35,000, on office space. 3 Purchased office equipment for P140,000 on account. 6 Sold a house and lot for Mr. Smith; billed Mr. Smith P220,000 for realty services performed. 27 Paid P55,000 on the balance related to the transaction of October 3. 30 Received bill for October utilities, P6,500 (not paid at this time). Requirement: Journalize the transactions. Explanations can be omitted. Case 2: GTC Company The GTC Company began operations on April 1. On April 30, the trial balance shows the following balances for selected accounts. Prepaid Insurance P 3,600 Equipment 28,000 Notes Payable 20,000 Unearned Service Revenue 4,200 Service Revenue 1,800 Analysis reveals the following additional data. Prepaid insurance is the cost of a 2-year insurance…
- account_circle Business Accounting Q&A Library Case 1: Real Estate Agency Oct. 1 Ms. Lea begins business as a real estate agent with a cash investment of P1,500,000. 2 Paid rent, P35,000, on office space. 3 Purchased office equipment for P140,000 on account. 6 Sold a house and lot for Mr. Smith; billed Mr. Smith P220,000 for realty services performed. 27 Paid P55,000 on the balance related to the transaction of October 3. 30 Received bill for October utilities, P6,500 (not paid at this time). Requirement: Journalize the transactions. Explanations can be omitted. Case 1: Real Estate Agency Oct. 1 Ms. Lea begins business as a real estate agent with a cash investment of P1,500,000. 2 Paid rent, P35,000, on office space. 3 Purchased office equipment for P140,000 on account. 6 Sold a house and lot for Mr. Smith; billed Mr. Smith P220,000 for realty services performed. 27 Paid P55,000 on the balance related to the transaction of October 3. 30 Received bill for October utilities, P6,500…Preparing income and expense statement Use Worksheet 2.2 Ariana and Nicholas Peterson are about to construct their income and expense statement for the year ending December 31, 2020. Nicholas is finishing up college and currently has no income. They have put together the following income and expense information for 2020: Ariana's salary $43,000 Reimbursement for travel expenses 1,700 Interest on: Savings account 110 Bonds of Delta Corporation 70 Groceries 4,150 Rent 9,300 Utilities 960 Gas and auto expenses 650 Nicholas' tuition, books, and supplies 3,300 Books, magazines, and periodicals 280 Clothing and other miscellaneous expenses 2,900 Cost of photographic equipment purchased with charge card 2,200 Amount paid to date on photographic equipment 1,600 Ariana's travel expenses 1,950 Purchase of a used car (cost) 9,750 Outstanding loan balance on car 7,300 Purchase of bonds in Delta Corporation 4,900 Using the information provided,…Direction: Encircle the letter of the best answer. 1.) jade invested P200,000 in a repair business. A. Debit land, credit cash B. Debit cash, credit Juan Dela Cruz, capital C. Debit land, credit account payable 2.) She paid the monthly rent of the office, P10,000. A. Debit cash, credit Juan Dela Cruz, capital B. Debit rent expense, credit cash C. Debit Juan Dela Cruz, personal, credit cash 3.) Sold a house and collected P15,000 commission. A. Debit cash, credit commission income B. Debit cash, credit Juan Dela Cruz, capital C. Debit commission expense, credit cash 4.) Received P20,000 as payment for services rendered to samantha A. Debit cash, credit service income B. Debit accounts receivable, credit service income C. Debit cash, credit accounts receivable 5.) Paid P10,000 salary of the mechanic for the first half of the month. A. Debit cash, credit Juan Dela Cruz, capital B. Debit salary expense, credit cash C. Debit salary expense, credit accounts payable