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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Problem 2-55A Events and Transactions

The accountant for Boatsman Products Inc. received the following information:

  1. Boatsman sent its customers a new price list. Prices were increased an average of 3% on all items.
  2. Boatsman accepted an offer of 5150.000 for land that it had purchased 2 years ago for 130,000. Cash and the deed for the property are to be exchanged in 5 days.
  3. Boatsman accepted $150,000 cash and gave the purchaser the deed for the property described in Item b.
  4. Boatmen’s president purchased 600 shares of the firm’s common stock from another stock-holder; The president paid $15 per share. The former stockholder had purchased the stock from Boatsman for $4 per share.
  5. Boatsman leases its delivery trucks from a local dealer. The dealer also performs maintenance on the trucks for boats man. Boats man received a $1.254 bill for maintenance from the dealer.

Required:

l. CONCEPTUAL CONNECTION Indicate whether or not each item qualifies as a transaction and should be recorded in the amounting system. Explain your reasoning.

2. CONCEPTUAL CONNECTION What accounting concept is illustrated by Item d?

To determine

Economic Entity:

The concept of economic entity assumes that the owner and its business should be treated as two different entities.

Requirement 2

What concept is illustrated by Event D.

Explanation

The transaction has taken place between the president of Boatsman and another stockholder which is a personal business of the president...

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