a.
Concept Introduction:
Accounting principles and assumptions: There are two types of accounting principles which are general principles and specific principles. General principles are the concepts and rules for the preparation of financial statements whereas specific principles are rules in detail that are used in reporting business transactions and events.
The amount to be reported on the financial statements for the purchased truck.
b.
Concept Introduction:
Accounting principles and assumptions: There are two types of accounting principles which are general principles and specific principles. General principles are the concepts and rules for the preparation of financial statements whereas specific principles are rules in detail that are used in reporting business transactions and events.
The monthly revenue recorded in May, June, and July applying the revenue recognition principle.
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- Taylor Company recently purchased a piece of equipment for $2,000 which will be paid within 30 days after delivery. At what point would the event be recorded in Taylors accounting system? When Taylor signs the agreement with the seller When Taylor receives an invoice (a bill) from the setter When Taylor receives the asset from the seller When Taylor pays $2.000 cash to the sellerarrow_forwardCapstone Consulting Services acquired land 5 years ago for $200,000. Capstone recently signed an agreement to sell the land for $375,000. In accordance with the sales agreenwnt, the buyer transferred $375,000 to Capstone’s bank account on February 20. How would elements of the accounting equation be affected by the sale?arrow_forwardNido Co. has a standing agreement with a supplier for purchasing car parts. The terms of the agreement are 3/15, n/30 from the invoice date of September 1. The company makes a purchase on September 1 for $5,000 and pays the amount due on September 13. What amount does Nido Co. pay in cash on September 13? A. $5,000 B. $4,850 C. $150 D. $4,250arrow_forward
- Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business sets up a line of credit with a supplier. The company purchases $10,000 worth of equipment on credit. Terms of purchase are 5/10, n/30. B. A customer purchases a watering hose for $25. The sales tax rate is 5%. C. Customers pay in advance for season tickets to a soccer game. There are fourteen customers, each paying $250 per season ticket. Each customer purchased two season tickets. D. A company issues 2,000 shares of its common stock with a price per share of $15.arrow_forwardReversing Entries Thomas Company entered into two transactions involving promissory notes and properly recorded each transaction. 1. On November 1, it purchased land at a cost of 8,000. It made a 2,000 down payment and signed a note payable agreeing to pay the 6,000 balance in 6 months plus interest at an annual rate of 10%. 2. On December 1, it accepted a 4,200, 3-month, 12% (annual interest rate) note receivable from a customer for the sale of merchandise. On December 31, Thomas made the following related adjustments: Required: 1. Assuming that Thomas uses reversing entries, prepare journal entries to record: a. the January 1, reversing entries b. the March 1, 4,326 collection of the note receivable c. the May 1, 6,300 payment of the note payable 2. Assuming instead that Thomas does not use reversing entries, prepare journal entries to record the collection of the note receivable and the payment of the note payable.arrow_forwardEthics and Cash Flows You are the accountant for Nello Company, which manufactures specialty equipment. Nello has been in financial difficulty, so its suppliers require purchases to he paid in cash. Furthermore, Nello has long-term debt with a debt covenant that requires it to maintain a 1:1 acid-test (quick) ratio. Nellos employees work a 5-day week, Monday through Friday. On Wednesday morning during the last week of the current year, Sam (the production supervisor) comes to you and says, I dont understand it. We have this large special order from a customer that must be delivered at the end of the first week in January. Once we get the raw materials, it is going to take 5 solid days of work without overtime to produce the order. If Bob (the president) would let me order the raw materials this morning, we could have them by late today. This would give us 2 days this week and the 4 days after New Years Day (Monday) of next week to complete the order without incurring overtime costs. But Bob says we must wait until next Tuesday to order the materials. This means we will have to work double time that Wednesday through Friday to finish the order. That overtime cost is going to really increase next years factory salary expense, so our profit and operating cash flows from that order will be very low. Please talk to him. When you approach Bob about buying the raw materials this morning, he says, If we purchase those materials today, we will have to write a check. And that means our cash flow from operating activities for this year will be much lower, which our shareholders wont like. Furthermore, our quick ratio will go down from 1.01:1 to 0.90:1, so our creditors may be upset. I know our profit and operating cash flows for next year will be lower if we delay the purchase, but that seems to be the best decision. Dont you agree? Required: From financial reporting and ethical perspectives, how would you respond to Bob?arrow_forward
- 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.arrow_forwardReview the following transactions, and prepare any necessary journal entries. A. On July 16, Arrow Corp. purchases 200 computers (Equipment) at $500 per computer from a supplier, on credit. Terms of the purchase are 4/10, n/50 from the invoice date of July 16. B. On August 10, Hondo Inc. receives advance cash payment from a client for legal services in the amount of $9,000. Hondo had yet to provide legal services as of August 10. C. On September 22, Jack Pies sells thirty pies for $25 cash per pie. The sales tax rate is 8%. D. On November 8, More Supplies paid a portion of their noncurrent note in the amount of $3,250 cash.arrow_forwardAir Compressors Inc. purchases compressor parts for its inventory from a supplier. The following transactions take place during the current year: A. On April 5, the company purchases 400 parts for $8.30 per part, on credit. Terms of the purchase are 4/ 10, n/30, invoice dated April 5. B. On May 5, Air Compressors does not pay the amount due and renegotiates with the supplier. The supplier agrees to $400 cash immediately as partial payment on note payable due, converting the debt owed into a short-term note, with a 7% annual interest rate, payable in three months from May 5. C. On August 5, Air Compressors pays its account in full. Record the journal entries to recognize the initial purchase, the conversion plus cash, and the payment.arrow_forward
- Transaction Analysis Pollys Cards $ Gifts Shop had the following transactions during the year: Pollys purchased inventory on account from a supplier for $8,000. Assume that Pollys uses a periodic inventory system. On May 1, land was purchased for $44,500. A 20% down payment was made, and an 18-month, 8% note was signed for the remainder. Pollys returned $450 worth of inventory purchased in (a), which was found broken when the inventory was received. Pollys paid the balance due on the purchase of inventory. On June 1, Polly signed a one-year, $15,000 note to First State Bank and received $13,800. Pollys sold 200 gift certificates for $25 each for cash. Sales of gift certificates are recorded as a liability. At year-end, 35% of the gift certificates had been redeemed. Sales for the year were $120,000, of which 90% were for cash. State sales tax of 6% applied to all sales must be remitted to the state by January 31. Required Record all necessary journal entries relating to these transactions. Assume that Pollys accounting year ends on December 31. Prepare any necessary adjusting journal entries. What is the total of the current liabilities at the end of the year?arrow_forwardAssume that a lawyer bills her clients $15000 on June 30, for services rendered during June. The lawyer collects $8500 of the billings during July and the remainder in August. Under the accrual basis of accounting, when would the lawyer record the revenue for the fees? A. June, $15,000; July, $0; and August, $0 B. June, $0; July, $6,500; and August, $8,500 C. June, $8,500; July, $6,500; and August, $0 D. June, $0; July, $8,500; and August, $6,500arrow_forwardMr. Macal started an auto trading business and invested 50000 dollars in this business He sold his cars to a car shop for 60000 dollars November 1 The store paid him 50000 dollars in cash The $ 10,000 fee will also be paid one month later (31 November According to the accrual, Mr. Macal's income is 60000 $ a) Please give a different example of accruals, and write a numeric example for it with accounting entries. b) Please classify differences between accrued expenses, payables, and provisions. Give an example for each one.arrow_forward
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