Identify the letter for the principle or assumption from A through F in the blank space next to each numberedsituation that it best explains or justifies.A. General accounting principleB. Measurement (cost) principleC. Business entity assumptionD. Revenue recognition principleE. Expense recognition (matching) principleF. Going-concern assumption In December of this year, Chavez Landscaping received a customer’s order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. Chavez should record the revenue from the customer order in March of next year, not in December of this year.
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Identify the letter for the principle or assumption from A through F in the blank space next to each numbered
situation that it best explains or justifies.
A. General accounting principle
B. Measurement (cost) principle
C. Business entity assumption
D. Revenue recognition principle
E. Expense recognition (matching) principle
F. Going-concern assumption In December of this year, Chavez Landscaping received a customer’s order and cash prepayment
to install sod at a house that would not be ready for installation until March of next year.
Chavez should record the revenue from the customer order in March of next year, not in
December of this year.
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- Types of Events For each of the following events, identify whether it is an external event that would be recorded as a transaction (E), an internal event that would be recorded as a transaction (I), or not recorded (NR). ________________ 1. A vendor for a companys supplies is paid an amount owed on account. ________________ 2. A customer pays its open account. ________________ 3. A new chief executive officer is hired. ________________ 4. The biweekly payroll is paid. ________________ 5. Depreciation on equipment is recognized. ________________ 6. A new advertising agency is hired to develop a series of newspaper ads for the company. ________________ 7. The advertising bill for the first month is paid. ________________ 8. The accountant determines the federal income taxes owed based on the income for the period.Identify whether each of the following transactions, which are related to revenue recognition, are accrual, deferral, or neither. A. provided legal services to client, who paid at the time of service B. received cash for legal services performed last month C. received cash from clients for future services to be provided D. provided legal services to client, to be collected next monthIdentify which of the following accounts would be listed on the companys Post-Closing Trial Balance. A. Accounts Receivable B. Accumulated Depreciation C. Cash D. Office Expense E. Note Payable F. Rent Revenue G. Retained Earnings H. Unearned Rent Revenue
- Read each definition below and write the number of the definition in the blank beside the appropriate term. The quiz solutions appear at the end of the chapter. Recognition Historical cost Current value Cash basis Accrual basis Revenues Revenue recognition principle Matching principle Expenses Adjusting entries Straight-line method Contra account Deferral Deferred expense Deferred revenue Accrual Accrued liability Accrued asset Accounting cycle Work sheet Real accounts Nominal accounts Closing entries Interim statements A device used at the end of the period to gather the information needed to prepare financial statements without actually recording and posting adjusting entries. Inflows of assets or settlements of liabilities from delivering or producing goods, rendering services, or conducting other activities. Journal entries made at the end of a period by a company using the accrual basis of accounting. Journal entries made at the end of the period to return the balance in all nominal accounts to zero and transfer the net income or loss and the dividends to Retained Earnings. A liability resulting from the receipt of cash before the recognition of revenue. The name given to balance sheet accounts because they are permanent and are not closed at the end of the period. An asset resulting from the recognition of a revenue before the receipt of cash. The amount of cash or its equivalent that could be received by selling an asset currently. The assignment of an equal amount of depreciation to each period. Cash has been paid or received but expense or revenue has not yet been recognized. A system of accounting in which revenues are recognized when a performance obligation is satisfied and expenses are recognized when incurred. Cash has not yet been paid or received but expense has been incurred or revenue recognized. Financial statements prepared monthly, quarterly, or at other intervals less than a year in duration. Revenues are recognized in the income statement when a performance obligation is satisfied. The process of recording an item in the financial statements as an asset, a liability, a revenue, an expense, or the like. An asset resulting from the payment of cash before the incurrence of expense. The name given to revenue, expense, and dividend accounts because they are temporary and are closed at the end of the period. A system of accounting in which revenues are recognized when cash is received and expenses are recognized when cash is paid. A liability resulting from the recognition of an expense before the payment of cash. The association of revenue of a period with all of the costs necessary to generate that revenue. An account with a balance that is opposite that of a related account. The amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets. Outflows of assets or incurrences of liabilities resulting from delivering goods, rendering services, or carrying out other activities. A series of steps performed each period and culminating with the preparation of a set of financial statements.Valley Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on July 31, 2019, follows: The following business transactions were completed by Valley Realty during August 2019: Aug. 1. Purchased office supplies on account, 3,150. 2.Paid rent on office for month, 7,200. 3.Received cash from clients on account, 83,900. 5.Paid insurance premiums, 12,000. 9.Returned a portion of the office supplies purchased on August 1, receiving full credit for their cost, 400. Analyzing Transactions Aug. 17. Paid advertising expense, 8,000. 23.Paid creditors on account, 13,750. Enter the following transactions on Page 19 of the two-column journal: 29.Paid miscellaneous expenses, 1,700. 30.Paid automobile expense (including rental charges for an automobile), 2,500. 31.Discovered an error in computing a commission during July; received cash from the salesperson for the overpayment, 2,000. 31.Paid salaries and commissions for the month, 53,000. 31.Recorded revenue earned and billed to clients during the month, 183,500. 31.Purchased land for a future building site for 75,000, paying 7,500 in cash and giving a note payable for the remainder. 31.Withdrew cash for personal use, 1,000. 31.Rented land purchased on August 31 to a local university for use as a parking lot during football season (September, October, and November); received advance payment of 5,000. Instructions 1. Record the August 1 balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark () in the Posting Reference column. 2. Journalize the transactions for August in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of August 31, 2019. 5. Assume that the August 31 transaction for Cindy Getmans cash withdrawal should have been 10,000. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?Review the following transactions, and prepare any necessary journal entries for Juniper Landscaping Services. A. On November 5, Juniper receives advance cash payment from a customer for landscaping services in the amount of $3,500. Juniper had yet to provide landscaping services as of November 5. B. On December 11, Juniper provides all of the landscaping services to the customer from November 5. C. On December 14, Juniper receives advance payment from another customer for landscaping services in the amount of $4,400. Juniper has yet to provide landscaping services as of December 14. D. On January 19 of the following year, Juniper provides and recognizes 80% of landscaping services to the customer from December 14.
- For each of the following situations write the principle, assumption, or concept that justifies or explains what occurred. A. A landscaper received a customers order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. The owner should record the revenue from the customer order in March of next year, not in December of this year. B. A company divides its income statements into four quarters for the year. C. Land is purchased for $205,000 cash; the land is reported on the balance sheet of the purchaser at $205,000. D. Brandys Flower Shop is forecasting its balance sheet for the next five years. E. When preparing financials for a company, the owner makes sure that the expense transactions are kept separate from expenses of the other company that he owns. F. A company records the expenses incurred to generate the revenues reported.Accounting concepts Match each of the following statements with the appropriate accounting concept. Sonic concepts may he used more than once, while others may not be used at all. Use the notat ions shown to indicate the appropriate accounting concept. Statements 1. Assume that a business will continue forever. 2. Material litigation involving the corporation is described in a note. 3. Monthly utilities costs are reported as expenses along with the monthly revenues. 4. Personal transactions of owners are kept separate from the business. 5. This concept supports relying on an independent actuary (statistician), rather than the chief operating officer of the coq)ration, to estimate a pension liability. 6. Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. 7. Land worth $800,000 is reported at its original purchase price of $220,000. 8. This concept justifies recording only transactions that are expressed in dollars. 9. If this concept was ignored, the confidence of users in the financial statements could not be maintained. 10. The changes in financial condition are reported at the end of the month.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.
- Elite Realty acts as an agent in buying, selling, renting, and managing real estate. The unadjusted trial balance on March 31, 2019, follows: The following business transactions were completed by Elite Realty during April 2019: Apr. 1. Paid rent on office for month, 6,500. 2.Purchased office supplies on account, 2,300. 5.Paid insurance premiums, 6,000. 10.Received cash from clients on account, 52,300. 15.Purchased land for a future building site for 200,000, paying 30,000 in cash and giving a note payable for the remainder. 17.Paid creditors on account, 6,450. 20.Returned a portion of the office supplies purchased on April 2, receiving full credit for their cost, 325. 23.Paid advertising expense, 4,300. Enter the following transactions on Page 19 of the two-column journal: 27.Discovered an error in computing a commission; received cash from the salesperson for the overpayment, 2,500. 28.Paid automobile expense (including rental charges for an automobile), 1,500. 29.Paid miscellaneous expenses, 1,400. 30.Recorded revenue earned and billed to clients during the month, 57,000. 30.Paid salaries and commissions for the month, 11,900. 30.Withdrew cash for personal use, 4,000. 30.Rented land purchased on April 15 to local merchants association for use as a parking lot in May and June, during a street rebuilding program; received advance payment of 10,000. Instructions 1. Record the April 1, 2019, balance of each account in the appropriate balance column of a four-column account, write Balance in the item section, and place a check mark () in the Posting Reference column. 2. Journalize the transactions for April in a two-column journal beginning on Page 18. Journal entry explanations may be omitted. 3. Post to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance of the ledger as of April 30, 2019. 5. Assume that the April 30 transaction for salaries and commissions should have been 19,100. (a) Why did the unadjusted trial balance in (4) balance? (b) Journalize the correcting entry. (c) Is this error a transposition or slide?The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the businesss operations: July 1.Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Musics checking account. 1.Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, 1,750. 1.Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2.Received 1,000 cash from customers on account. 3.On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of 3,600. Any additional hours beyond 80 will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3.Paid 250 to creditors on account. 4.Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5.Purchased office equipment on account from Office Mart, 7,500. 8.Paid for a newspaper advertisement, 200. 11.Received 1,000 for serving as a disc jockey for a party. 13.Paid 700 to a local audio electronics store for rental of digital recording equipment. 14.Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16.Received 2,000 for serving as a disc jockey for a wedding reception. 18.Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22.Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23.Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27.Paid electric bill, 915. 28.Paid wages of 1,200 to receptionist and part-time assistant. 29.Paid miscellaneous expenses, 540. 30.Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31.Received 3,000 for serving as a disc jockey for a party. 31.Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists music during July. 31.Withdrew 1,250 cash from PS Music for personal use. PS Musics chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: Instructions 1. Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4. Prepare an unadjusted trial balance as of July 31, 2019.The transactions completed by PS Music during June 2019 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations: July 1. Peyton Smith made an additional investment in PS Music by depositing 5,000 in PS Music's checking account. 1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music: store. Paid rent for July, 1,750. 1. Paid a premium of 2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2. Received 1,000 cash from customers on account. 3. On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for SO hours per month for a monthly fee of 3,600. Any additional hours beyond SO will be billed to KXMD at 40 per hour. In accordance with the contract, Peyton received 7,200 from KXMD as an advance payment for the first two months. 3. Paid 250 to creditors on account. 4. Paid an attorney 900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5. Purchased office equipment on account from Office Mart, 7,500. 8. Paid for a newspaper advertisement, 200. 11. Received 1,000 for serving as a disc jockey for a party. 13. Paid 700 to a local audio electronics store for rental of digital recording equipment. 11. Paid wages of 1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: 16. Received 2,000 for serving as a disc jockey for a wedding reception. 18. Purchased supplies on account, 850. July 21. Paid 620 to Upload Music for use of its current music demos in making various music sets. 22. Paid 800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23. Served as disc jockey for a party for 2,500. Received 750, with the remainder due August 4, 2019. 27. Paid electric bill, 915. 28. Paid wages of 1,200 to receptionist and part-time assistant. 29. Paid miscellaneous expenses, 540. 30. Served as a disc jockey for a charity ball for 1,500. Received 500, with the remainder due on August 9, 2019. 31. Received 3,000 for serving as a disc jockey for a party. 31. Paid 1,400 royalties (music expense) to National Music Clearing for use of various artists' music during July. 31. Withdrew l,250 cash from PS Music for personal use. PS Music's chart of accounts and the balance of accounts as of July 1, 2019 (all normal balances), are as follows: 11 Cash 3,920 12 Accounts receivable 1,000 14 Supplies 170 15 Prepaid insurance 17 Office Equipment 21 Accounts payable 250 23 Unearned Revenue 31 Peyton smith, Drawing 4,000 32 Fees Earned 500 41 Wages Expense 6,200 50 Office Rent Expense 400 51 Equipment Rent Expense 800 52 Utilities Expense 675 53 Supplies Expense 300 54 music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Instructions 1.Enter the July 1, 2019, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column and place a check mark () in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2.Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. 3.Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. 4.Prepare an unadjusted trial balance as of July 31, 2019.
