INTERMEDIATE ACCOUNTING
8th Edition
ISBN: 9780078025839
Author: J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 2, Problem 2.1BYP
Judgment Case 2–1
Cash versus accrual accounting;
• LO2–4, LO2–8
You have recently been hired by Davis & Company, a small public accounting firm. One of the firm’s partners, Alice Davis, has asked you to deal with a disgruntled client, Mr. Sean Pitt, owner of the city’s largest hardware store. Mr. Pitt is applying to a local bank for a substantial loan to remodel his store. The bank requires accrual based financial statements but Mr. Pitt has always kept the company’s records on a cash basis. He doesn’t see the purpose of accrual based statements. His most recent outburst went something like this: “After all, I collect cash from customers, pay my bills in cash, and I am going to pay the bank loan with cash. And, I already show my building and equipment as assets and
Required:
1. Explain the difference between a cash basis and an accrual basis measure of performance.
2. Why, in most cases, does accrual basis net income provide a better measure of performance than net operating
3. Explain the purpose of adjusting entries as they relate to the difference between cash and accrual accounting.
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Chapter 2 Solutions
INTERMEDIATE ACCOUNTING
Ch. 2 - Explain the difference between external events and...Ch. 2 - Each economic event or transaction will have a...Ch. 2 - What is the purpose of a journal? What is the...Ch. 2 - Explain the difference between permanent accounts...Ch. 2 - Describe how debits and credits affect assets,...Ch. 2 - Describe how debits and credits affect temporary...Ch. 2 - What is the first step in the accounting...Ch. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - What is an unadjusted trial balance? An adjusted...Ch. 2 - Define adjusting entries and discuss their...Ch. 2 - Define closing entries and their purpose.Ch. 2 - Define prepaid expenses and provide at least two...Ch. 2 - Deferred revenues represent liabilities recorded...Ch. 2 - Define accrued liabilities. What adjusting journal...Ch. 2 - Prob. 2.17QCh. 2 - [Based on Appendix A] What is the purpose of a...Ch. 2 - [Based on Appendix B] Define reversing entries and...Ch. 2 - [Based on Appendix C] What is the purpose of...Ch. 2 - Prob. 2.21QCh. 2 - Transaction analysis LO21 The Marchetti Soup...Ch. 2 - Journal entries LO22 Prepare journal entries for...Ch. 2 - Prob. 2.3BECh. 2 - Journal entries LO22 Prepare journal entries for...Ch. 2 - Adjusting entries LO25 Prepare the necessary...Ch. 2 - Adjusting entries; income determination LO24,...Ch. 2 - BE2–7
Adjusting entries
• LO2–5
Prepare the...Ch. 2 - Prob. 2.8BECh. 2 - Prob. 2.9BECh. 2 - BE2–10
Financial statements
The following account...Ch. 2 - Prob. 2.11BECh. 2 - Closing entries LO27 The year-end adjusted trial...Ch. 2 - Prob. 2.13BECh. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 2.3ECh. 2 - Prob. 2.4ECh. 2 - Prob. 2.5ECh. 2 - Debits and credits LO22 Indicate whether a debit...Ch. 2 - Prob. 2.7ECh. 2 - Prob. 2.8ECh. 2 - Prob. 2.9ECh. 2 - Prob. 2.10ECh. 2 - Prob. 2.11ECh. 2 - Prob. 2.12ECh. 2 - Prob. 2.13ECh. 2 - Prob. 2.14ECh. 2 - Prob. 2.15ECh. 2 - Prob. 2.16ECh. 2 - Prob. 2.17ECh. 2 - Prob. 2.18ECh. 2 - Prob. 2.19ECh. 2 - Prob. 2.20ECh. 2 - Reversing entries Appendix 2B The employees of...Ch. 2 - Prob. 2.22ECh. 2 - Prob. 2.23ECh. 2 - Special journals Appendix 2C The White Companys...Ch. 2 - Prob. 2.25ECh. 2 - Prob. 1CPACh. 2 - Prob. 2CPACh. 2 - 3. Compared to the accrual basis of accounting,...Ch. 2 - Prob. 4CPACh. 2 - Prob. 5CPACh. 2 - Prob. 2.1PCh. 2 - Prob. 2.2PCh. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Prob. 2.5PCh. 2 - Prob. 2.6PCh. 2 - Prob. 2.7PCh. 2 - Prob. 2.8PCh. 2 - Prob. 2.9PCh. 2 - P2–10
Accrual accounting; financial...Ch. 2 - Prob. 2.11PCh. 2 - Prob. 2.12PCh. 2 - Prob. 2.13PCh. 2 - Judgment Case 21 Cash versus accrual accounting;...Ch. 2 - Judgment Case 2–2
Cash versus accrual...Ch. 2 - Communication Case 23 Adjusting entries LO24 I...
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