For each of the following situations, state the accounting principle or concept that has been applied or violated AND provide an explanation. (a) Hong Kong Entertainment Company has organized two concerts in March and May 2021. Tickets were sold in advance in December 2020. from both concerts were recorded as revenue earned in the company's Income Statement for the year ended March 31, 2021. All the money received (i) Accounting Principle / Concept Applied OR Violated (ii) Explanation: John was the only owner of ABC Company. John purchased a birthday gift to his son who was six years old. He asked the accountant of the company to pay for it and record it as the entertainment expense of ABC Company. (b)

For each of the following situations, state the accounting principle or concept that has been applied or violated AND provide an explanation. (a) Hong Kong Entertainment Company has organized two concerts in March and May 2021. Tickets were sold in advance in December 2020. from both concerts were recorded as revenue earned in the company's Income Statement for the year ended March 31, 2021. All the money received (i) Accounting Principle / Concept Applied OR Violated (ii) Explanation: John was the only owner of ABC Company. John purchased a birthday gift to his son who was six years old. He asked the accountant of the company to pay for it and record it as the entertainment expense of ABC Company. (b)

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter3: Accrual Accounting

Section: Chapter Questions

Problem 2MCQ: In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in...

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In December 2019, Swanstrom Inc. receives a cash payment of $3,500 for services performed in December 2019 and a cash payment of S4,500 for services to be performed in January 2020. Swanstrom also receives the December utility bill for S600 but does not pay this bill until 2020. For 2019, under the accrual basis of accounting, Swanstrom would recognize: a. $8,000 of revenue and $600 of expense. b. $8,000 of revenue and $0 of expense. c. $3,500 of revenue and $600 of expense. d. $3,500 Of revenue and $0 of expense.
Considering the following events, determine which month the revenue or expenses would be recorded using the accounting method specified. a. Gerber Company uses the cash basis of accounting. Gerber prepays cash in May for insurance that only covers the following month, (June). b. Matthews and Dudley Attorneys uses the accrual basis of accounting. Matthews and Dudley Attorneys receives cash from customers in June for services to be performed in July. c. Eckstein Company uses the accrual basis of accounting. Eckstein prepays cash in October for rent that covers the following month, (October). d. Gerbino Company uses the cash basis of accounting. Gerbino makes a sale to a customer in February but does not expect payment until March.
Listed below are the current Accounting Assumptions and Principles Economic Entity Assumption Monetary Unit Assumption Historical Cost Principle Going Concern Assumption Revenue Recognition Principle Full Disclosure Principle Time Period Assumption Matching Principle Required: For the following situations, identify whether the situation represents a violation or a correct application of GAAP, and which assumption/principle is applicable. a. In May 2021, Regent Corporation recorded as revenue $5,000 received in advance from a customer for a job that would be completed in June 2021. Violation: (Yes/No) Applicable Assumption/Principle: b. Sally Maze made sure to keep her personal expenditures separate from her marketing company books.…
Zuhoor Muscat Company reported the following transactions during the year 2020: collected RO 45,000 cash from customers for services provided during 2020 and received RO 45,000 from customers for services provided during 2019. Additionally, Zuhoor Muscat Company provided services to customers on account during 2020 for a total of RO 90,0000 and accepted RO 55,000 cash for services to be performed in 2021. If Zuhoor Muscat Company is applying accrual accounting, then the effect of the above transactions on its net income at year-end 2020 will be:
QWERTY Co. uses a fiscal year accounting ending July 31st of each year. On July 31, 2021, it recorded total gross receipts amounting to P18M, of which P10M came from education-related activities, while P8M from other unrelated business activities. Also, QUERTY Co. recorded cost of service and operating expenses from related activities amounting to P2M and P1M, respectively, and from unrelated business activities amounting to P3M and P2M, respectively. Compute the Income Tax Due of QUERTY Co. for the fiscal year ending July 31, 2021.
The company receives a $500,000 payment from a client. Half of this payment is for services that the company had previously performed for the client, while the other half of the payment is a retainer fee for services to be performed in the future. For each element of the fundamental accounting equation (A, L, E), indicate whether that element increases, decreases, or ultimately remains unchanged.
Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2020–2023 are as follows: Service Revenue Collections Pretax AccountingIncome 2020 $ 660,000 $ 620,000 $ 186,000 2021 750,000 778,000 260,000 2022 710,000 702,000 228,000 2023 716,000 720,000 200,000 There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%. (Hint: You will find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2020–2023.) Required:1. to 3. Prepare the appropriate journal…
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Zuhoor Muscat Company reported the following transactions during the year 2020collected RO 45,000 cash from customers for services provided during 2020 and recelved RO 45, 000 from customers for services provided during 2019. Additionally, Zuhoon Muscat Company provided services to customers on account during 2020 for a total of RO 90,000 and accepted RO 55,000 cash for services to be performed in 2021. If Zuhoor Muscat Company applying accrual accounting, then the effect of the above transactions on its net income at yearend 2020 will be: a. Increase by RO 135,000 b. Increase by RO 145,000 . Increase by RO 235,000 dIncrease by RO 190,000 e None of the options are correct
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The following transactions occurred during December 31, 2021, for the Microchip Company. On October 1, 2021, Microchip lent $90,000 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2022. On November 1, 2021, the company paid its landlord $6,000 representing rent for the months of November through January. Prepaid rent was debited. On August 1, 2021, collected $12,000 in advance rent from another company that is renting a portion of Microchip’s factory. The $12,000 represents one year’s rent and the entire amount was credited to deferred rent revenue. Depreciation on office equipment is $4,500 for the year. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $8,000. The company records vacation pay as salaries expense. Microchip began the year with $2,000 in its asset account, supplies. During the year, $6,500 in supplies were purchased and debited to supplies. At year-end, supplies costing…
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