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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 3-63A Revenue and Expense Recognition

Security Specialists performs security services for local businesses. During 2019, Security Specialists performed of security services and collected cash from customers. Security Specialist’s employees earned salaries of $82,350 per month. During 2019, Security Services paid salaries of S980,200 cash for work performed. At the beginning of 2019, there were $2,875 of supplies on hand. Supplies of S65,800 were purchased during the year, and $9,225 of supplies were on hand at the end of the year. Other general and administrative expenses incurred during the year were $26,500.

Required:

  1. Calculate revenue and expenses for 2019.
  2. Prepare the 2019 income statement.
  3. CONCEPTUAL CONNECTION Describe the accounting principles used to prepare the income statement.

To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Requirement-1:

To Calculate:

The Revenue and expenses for the year 2019.

Explanation

The Revenue and expenses for the year 2019 are calculated as follows:

    Security specialists
    For the year 2019
    Revenues:
    Security service revenue $ 1,425,700
    Total Revenue (A)$ 1,425,...
To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Requirement-2:

To Prepare:

The Income Statement for the year 2019.

To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Requirement-3:

To Indicate:

The accounting principle used in preparing the Income Statement.

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