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Case 2-63 Analysis of the Accounting Cycle Susan Eel wants to sell you her wholesale fish store. She shows you a balance sheet with total assets of $50,000 and total liabilities of $20,000. According to the income statement, last year’s net income was $40,000; When examining the accounting records, you notice that several accounts receivable in the $10,000 to $11000 range are not supported by source documents. You also notice that there is no source documentation to support the $30,000 balance in the building account and the $10,000 balance in the equipment account. Susan tells you that she gave the building and refrigeration equipment to the business in exchange for stock. She also says that she has not had time to set up and monitor any paperwork for accounts receivable or accounts payable. Required: What requirements for transaction recognition appear to have been ignored when the accounts receivable building, and equipment were recorded?

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881
BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

Solutions

Chapter
Section
Chapter 2, Problem 63.1C
Textbook Problem

Case 2-63 Analysis of the Accounting Cycle

Susan Eel wants to sell you her wholesale fish store. She shows you a balance sheet with total assets of $50,000 and total liabilities of $20,000. According to the income statement, last year’s net income was $40,000;

When examining the accounting records, you notice that several accounts receivable in the $10,000 to $11000 range are not supported by source documents. You also notice that there is no source documentation to support the $30,000 balance in the building account and the $10,000 balance in the equipment account. Susan tells you that she gave the building and refrigeration equipment to the business in exchange for stock. She also says that she has not had time to set up and monitor any paperwork for accounts receivable or accounts payable.

Required:

What requirements for transaction recognition appear to have been ignored when the accounts receivable building, and equipment were recorded?

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Chapter 2 Solutions

Cornerstones of Financial Accounting
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Ch. 2 - What is the basic process used in transaction...Ch. 2 - In analyzing a transaction, can a transaction only...Ch. 2 - How do revenues and expenses affect the accounting...Ch. 2 - What is a T-account? Describe the basic components...Ch. 2 - Do you agree with the statement that debits mean...Ch. 2 - The words debit and credit are used in two ways in...Ch. 2 - All accounts have normal balances. What is the...Ch. 2 - When a journal entry is made, what must be equal?...Ch. 2 - Can accounting transactions be direction recorded...Ch. 2 - Why is the term double-entry an appropriate...Ch. 2 - What are the initial steps in the accounting cycle...Ch. 2 - What kinds of errors will a trial balance detect?...Ch. 2 - Which of the following is not a benefit derived...Ch. 2 - Which of the following is not a characteristic of...Ch. 2 - Information that provides feedback about prior...Ch. 2 - Relevant information possesses this quality:...Ch. 2 - Which of the following is not an assumption that...Ch. 2 - Which principle requires that expenses be recorded...Ch. 2 - Taylor Company recently purchased a piece of...Ch. 2 - The effects of purchasing inventory on credit are...Ch. 2 - The effects of paying salaries for the current...Ch. 2 - Which of the following statements is false? The...Ch. 2 - Which of the following statements are true? Debits...Ch. 2 - Debits will: increase assets. expenses, and...Ch. 2 - Which of the following statements are true? A...Ch. 2 - Posting: involves transferring the information in...Ch. 2 - A trial balance: lists only revenue and expense...Ch. 2 - CORNERSTONE 2.1 Cornerstone Exercise 2-16...Ch. 2 - Cornerstone Exercise 2-17 Qualitative...Ch. 2 - CORNERSTONE 2.1 Four statements are given below....Ch. 2 - Cornerstone Exercise 2-1 9 Accounting Principles...Ch. 2 - Cornerstone Exercise 2-20 Transaction Analysis...Ch. 2 - Cornerstone Exercise 2-21 Transaction Analysis...Ch. 2 - Cornerstone Exercise 2-22 Transaction Analysis The...Ch. 2 - Cornerstone Exercise 2-23 Debit and Credit...Ch. 2 - Cornerstone Exercise 2-24 Journalize Transactions...Ch. 2 - Cornerstone Exercise 2-25 Journalize Transactions...Ch. 2 - Cornerstone Exercise 2-26 Preparing a Trial...Ch. 2 - Brief Exercise 2-2? Qualitative Characteristics...Ch. 2 - Brief Exercise 2-28 Assumptions and Principles...Ch. 2 - Brief Exercise 2-2? Events and Transactions...Ch. 2 - Brief Exercise 2-30 Transaction Analysis Galle...Ch. 2 - Brief Exercise 2-31 Debit and Credit Procedures...Ch. 2 - Brief Exercise 2-32 Journalize Transactions Galle...Ch. 2 - Brief Exercise 2-33 Posting Journal Entries Listed...Ch. 2 - Brief Exercise 2-34 Preparing a Trial Balance The...Ch. 2 - Exercise 2-35 Qualitative Characteristics Listed...Ch. 2 - Exercise 2-36 Assumptions and Principles Presented...Ch. 2 - Exercise 2-37 Events and Transactions Several...Ch. 2 - Exercise 2-38 Events and Transactions The...Ch. 2 - Exercise 2-39 Transaction Analysis OBJECTIVE e The...Ch. 2 - Exercise 2-40 Transaction Analysis Amanda Webb...Ch. 2 - Exercise 2-41 Transaction Analysis and Business...Ch. 2 - Exercise 2-42 Inferring Transactions from Balance...Ch. 2 - Exercise 2-43 Transaction Analysis Goal Systems, a...Ch. 2 - Exercise 2-44 Transaction Analysis OBJECTIVE 9...Ch. 2 - Exercise 2-45 Inferring Transactions from Balance...Ch. 2 - Exercise 2-46 Normal Balances and Financial...Ch. 2 - OBJECTIVE 9 Exercise 2-47 Debit and Credit Effects...Ch. 2 - Exercise 2-48 Debit and Credit Effect on...Ch. 2 - Exercise 2-49 Journalizing Transactions Kauai...Ch. 2 - Exercise 2-50 Journalizing Transactions Remington...Ch. 2 - Exercise 2-51 Transaction Analysis and Journal...Ch. 2 - Exercise 2-52 Accounting Cycle Rosenthal...Ch. 2 - Exercise 2-53 Preparing a Trial Balance...Ch. 2 - Exercise 2-54 Effect of Errors on a Trial Balance...Ch. 2 - Problem 2-55A Events and Transactions The...Ch. 2 - Problem 2-56A Analyzing Transactions Luis Madero,...Ch. 2 - Problem 2-57A Inferring Transactions from...Ch. 2 - Problem 2-58A Debit and Credit Procedures A list...Ch. 2 - Problem 2-59A Journalizing Transactions Monroe...Ch. 2 - Problem 2-60A Journalizing and Posting...Ch. 2 - Problem 2-61A The Accounting Cycle Karleens...Ch. 2 - Problem 2-62B Comprehensive Problem Mulberry...Ch. 2 - Problem 2-55B Events and Transactions The...Ch. 2 - Problem 2-563 Analyzing Transactions Several years...Ch. 2 - Problem 2-573 Inferring Transactions from Accounts...Ch. 2 - Problem 2-58B Debit and Credit Procedures A list...Ch. 2 - Problem 2-593 Journalizing Transactions Monilast...Ch. 2 - Problem 2-603 Journalizing and Posting...Ch. 2 - Problem 2-6B The Accounting Cycle Sweetwater...Ch. 2 - Problem 2-62B Comprehensive Problem Mulberry...Ch. 2 - Case 2-63 Analysis of the Accounting Cycle Susan...Ch. 2 - Case 2-63 Analysis of the Accounting Cycle Susan...Ch. 2 - Case 2-63 Analysis of the Accounting Cycle Susan...Ch. 2 - Case 2-64 Analysis of the Effects of Current Asset...Ch. 2 - Case 2-64 Analysis of the Effects of Current Asset...Ch. 2 - Case 2-64 Analysis of the Effects of Current Asset...Ch. 2 - Case 2-64 Analysis of the Effects of Current Asset...Ch. 2 - Case 2-65 Ethical Issues Kathryn Goldsmith is the...Ch. 2 - Case 2-65 Ethical Issues Kathryn Goldsmith is the...Ch. 2 - Case 2-66 Research and Analysis Using the Annual...Ch. 2 - Case 2-66 Research and Analysis Using the Annual...Ch. 2 - Case 2-66 Research and Analysis Using the Annual...Ch. 2 - Case 2-67 Comparative Analysis: Under Armour,...Ch. 2 - Case 2-67 Comparative Analysis: Under Armour,...Ch. 2 - Case 2-67 Comparative Analysis: Under Armour,...Ch. 2 - Case 2-68 Accounting for Partially Completed...Ch. 2 - Case 2-68 Accounting for Partially Completed...Ch. 2 - Case 2-69 CONTINUING PROBLEM: FRONT ROW...Ch. 2 - Case 2-69 CONTINUING PROBLEM: FRONT ROW...Ch. 2 - Case 2-69 CONTINUING PROBLEM: FRONT ROW...

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