Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881



Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

Exercise 2-37 Events and Transactions

Several events are listed below

  1. Common stock is issued to investors.
  2. An agreement is signed with a janitorial service to provide cleaning services over the next 12 months.
  3. Inventory is purchased.
  4. Inventory is sold to customers.
  5. Two investors sell their common stock to another investor.
  6. A 2-year insurance policy is purchased


  1. CONCEPTUAL CONNECTION For each of the events1 identify which ones qualify for recognition in the financial statements.
  2. CONCEPTUAL CONNECTION For events that do not qualify for recognition, explain your reasoning.

To determine


If the business or economic event does affect the aspects asset, liabilities, and stockholders’ equity of the accounting equation, such event is not be recognize in the financial statement.

Requirement 2

Explain the reason for events which does not qualify for recognition.


B. The event will not be recognized in the financial statement unless the service is performed. It is just a promise to perform janitorial service which is neither performed nor paid in advance...

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