For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).3. Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery isbeing expensed over the life of the machinery

For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).3. Cypress Manufacturing Company purchased machinery having a five-year life. The cost of the machinery isbeing expensed over the life of the machinery

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 1PB: Consider the following situations and determine (1) which type of liability should be recognized...

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Soon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2016 to 2019, inclusive. The following data were in the Trucks account as of January 1, 2016: The Accumulated DepreciationTrucks account, previously adjusted to January 1,2016, and duly entered in the ledger, had a balance on that date of 16,460. This amount represented the straight-line depreciation on the four trucks from the respective dates of purchase, based on a 5-year life and no residual value. No debits had been made to this account prior to January 1, 2016. Transactions between January 1,2017, and December 31, 2019, and their record in the ledger were as follows: 1. July 1, 2016: Truck no. 1 was sold for 1,000 cash. The entry was a debit to Cash and a credit to Trucks, 1,000. 2. January 1, 2017: Truck no. 3 was traded for a larger one (no. 5) with a 5-year life. The agreed purchase price was 12,000. Jarrett paid the other company 1,780 cash on the transaction. The entry was a debit to Trucks, 1,780, and a credit to Cash, 1,780. 3. July 1, 2018: Truck no. 4 was damaged in a wreck to such an extent that it was sold as junk for 50 cash. Jarrett received 950 from the insurance company. The entry made by the bookkeeper was a debit to Cash, 1,000, and credits to Miscellaneous Revenue, 50, and Trucks, 950, 4. July 1, 2018: A new truck (no. 6) was acquired for 20,000 cash and debited at that amount to the Trucks account. The truck has a 5-year life. Entries for depreciation had been made at the close of each year as follows: 2016, 8,840; 2017, 5,436; 2018, 4,896; 2019, 4,356. Required: 1. Next Level For each of the 4 years, calculate separately the increase or decrease in earnings arising from the companys errors in determining or entering depreciation or in recording transactions affecting trucks. 2. Prove your work by one compound journal entry as of December 31, 2019; the adjustment of the Trucks account is to reflect the correct balances, assuming that the books have not been closed for 2019.
For each of the following accounts, identify in which section of the classified balance sheet it would be presented: current assets, property, intangibles, other assets, current liabilities, long-term liabilities, or stockholders equity. A. Building B. Cash C. Common Stock D. Copyright E. Prepaid Advertising F. Notes Payable (due six months later) G. Taxes Payable H. Unearned Rent Revenue
Can I please get help and a how to explaination for this practice? Sinclair Manufacturing Company experienced the following accounting events during its first year of operation. With the exception of the adjusting entries for depreciation, assume that all transactions are cash transactions and that financial statement data are prepared in accordance with GAAP. Acquired $68,000 cash by issuing common stock. Paid $8,700 for the materials used to make its products, all of which were started and completed during the year. Paid salaries of $4,500 to selling and administrative employees. Paid wages of $10,000 to production workers. Paid $9,600 for furniture used in selling and administrative offices. The furniture was acquired on January 1. It had a $1,600 estimated salvage value and a four-year useful life. Paid $16,000 for manufacturing equipment. The equipment was acquired on January 1. It had a $1,000 estimated salvage value and a five-year useful life. Sold inventory to customers for…
Assume for each of the following independent cases that the annual accounting period ends onDecember 31 and that the total of all revenue accounts was $150,000 and the total of all expenseaccounts was $130,000.Case A: Assume that the business is a sole proprietorship owned by Proprietor A. Prior tothe closing entries, the Capital account reflected a credit balance of $50,000 and theDrawings account showed a balance of $8,000.Case B: Assume that the business is a partnership owned by Partner A and Partner B. Priorto the closing entries, the owners’ equity accounts reflected the following balances:A, Capital, $40,000; B, Capital, $38,000; A, Drawings, $5,000; and B, Drawings,$9,000. Profits and losses are divided equally.Case C: Assume that the business is a corporation. Prior to the closing entries, the stockholders’ equity accounts showed the following: Capital Stock, par $10, authorized 30,000shares, outstanding 15,000 shares; Additional Paid-In Capital, $5,000; RetainedEarnings,…
For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).6. Gigantic Corporation purchased two small calculators at a cost of $32.00. The cost of the calculators wasexpensed even though they had a three-year estimated useful life.
Presented below are a number of business transactions that occurred during the current year for Gonzales, Inc. Instructions In each of the situations, discuss the appropriateness of the journal entries in terms of generally accepted accounting principles. a. The president of Gonzales, Inc. used his expense account to purchase a new Tahoe solely for personal use. The following journal entry was made. Miscellaneous Expense 29,000 Cash 29,000 b. Merchandise inventory that cost $620,000 is reported on the balance sheet at $690,000, the expected selling price less estimated selling costs. The following entry was made to record this increase in value. Inventory 70,000 Sales Revenue 70,000 c. The company is being sued for $500,000 by a customer who claims damages for personal injury apparently caused by a defective product. Company attorneys feel extremely confident that the company will have no liability for damages resulting…
For each of the following situations, indicate whether you agree or disagree with the financial reporting practiceemployed and state the accounting concept that is applied (if you agree) or violated (if you disagree).7. Esquire Company provides financial statements to external users every three years.
Identify the accounting concept that was violated in each of the following situations.1. Astro Turf Company recognizes an expense, cost of goods sold, in the period the product is manufactured.2. McCloud Drug Company owns a patent that it purchased three years ago for $2 million. The controller recently revalued the patent to its approximate market value of $8 million.3. Philips Company pays the monthly mortgage on the home of its president Larry Crosswhite and charges the expenditure to miscellaneous expense.
At the end of the accounting period ending December 31 of the current year, the following totals were obtained from the financial statements of Nelsie Kat, a well-known CPA practitioner. Asset =1,210,000 Liab = 487,500 OE = 722,500 Net profit for current yr reported at 524K a. Unused supplies, P 1,200 b. Estimated uncollectible accounts, P 4,300 c. Furniture acquired on June 1 of the current year for P 32,000 has an estimated salvage value of P 3,000 at the end of its useful life of 8 years. d. Accrued salaries, P 6,000 e. Unexpired insurance, P 10,500 f.Accrued interest on notes receivable, P 3,600 g.Accrued interest on notes payable, P 4,300 h. Unearned rental income, P 12,000 Compute for adjusted net income? Compute for adjusted total asset?
Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Assume that the company’s income tax rate is 40% for all items. Debit Credit a. Interest revenue $ 14,400 b. Depreciation expense—Equipment $ 34,400 c. Loss on sale of equipment 26,250 d. Accounts payable 44,400 e. Other operating expenses 106,800 f. Accumulated depreciation—Equipment 72,000 g. Gain from settlement of lawsuit 44,400 h. Accumulated depreciation—Buildings 175,300 i. Loss from operating a discontinued segment (pretax) 18,650 j. Gain on insurance recovery of tornado damage 29,520 k. Net sales 1,002,500 l. Depreciation expense—Buildings 52,400 m. Correction of overstatement of prior year’s sales (pretax) 16,400 n. Gain on sale of discontinued segment’s assets (pretax) 36,000 o. Loss from settlement of lawsuit 24,150 p. Income tax expense ? q. Cost of goods sold 486,500…
Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Assume that the company’s income tax rate is 40% for all items. Debit Credit a. Interest revenue $ 14,400 b. Depreciation expense—Equipment $ 34,400 c. Loss on sale of equipment 26,250 d. Accounts payable 44,400 e. Other operating expenses 106,800 f. Accumulated depreciation—Equipment 72,000 g. Gain from settlement of lawsuit 44,400 h. Accumulated depreciation—Buildings 175,300 i. Loss from operating a discontinued segment (pretax) 18,650 j. Gain on insurance recovery of tornado damage 29,520 k. Net sales 1,002,500 l. Depreciation expense—Buildings 52,400 m. Correction of overstatement of prior year’s sales (pretax) 16,400 n. Gain on sale of discontinued segment’s assets (pretax) 36,000 o. Loss from settlement of lawsuit 24,150 p. Income tax expense ? q. Cost of goods sold 486,500…
Selected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Assume that the company’s income tax rate is 40% for all items. Debit Credit a. Interest revenue $ 14,400 b. Depreciation expense—Equipment $ 34,400 c. Loss on sale of equipment 26,250 d. Accounts payable 44,400 e. Other operating expenses 106,800 f. Accumulated depreciation—Equipment 72,000 g. Gain from settlement of lawsuit 44,400 h. Accumulated depreciation—Buildings 175,300 i. Loss from operating a discontinued segment (pretax) 18,650 j. Gain on insurance recovery of tornado damage 29,520 k. Net sales 1,002,500 l. Depreciation expense—Buildings 52,400 m. Correction of overstatement of prior year’s sales (pretax) 16,400 n. Gain on sale of discontinued segment’s assets (pretax) 36,000 o. Loss from settlement of lawsuit 24,150 p. Income tax expense ? q. Cost of goods sold 486,500…