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You are the bookkeeper for a small but thriving business. You have asked the owner for the information you need to make
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Bundle: College Accounting: A Career Approach (with QuickBooks Online), Loose-leaf Version, 13th + LMS Integrated CengageNOWV2, 1 term (6 months) Printed Access
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- At a recent luncheon, you were seated next to Mr. Fogle, the president of a local company that manufactures food processors. He heard that you were in a financial accounting class and asked:“Why is it that I’m forced to record depreciation expense on my property when I could sell it for more than I originally paid? I thought that the purpose of the balance sheet is to reflect the value of my business and that the purpose of the income statement is to report the net change in value or wealth of a company. It just doesn’t make sense to penalize my profits when the building hasn’t lost any value.”At the conclusion of the luncheon, you promised to send him a short explanation of the rationale for current depreciation practices.Required:Prepare a memo to Mr. Fogle. Explain the accounting concept of depreciation and contrast this with the dictionary definition of depreciation.arrow_forwardYou are employed as an accountant for Innovative Computing. Your company is in the process of signing a large contract with an electronics components supplier. You have a friend who works for the electronics components supplier, and you were told the company having trouble paying bills. You ask to review the financial statements of the supplier. 1. Which financial statements would you find most helpful to determine the creditworthiness of the supplier? What information from the financial statements would you use to either support or disprove your friend’s claims? 2. What are the four basic financial statements? What is their purpose and what does each one tell you about a company? 3. How are the four financial statements interrelated? Which line items are used to prepare other statements? 4. In your opinion, explain which financial statement you think is the most important?arrow_forwardSuppose you started your own landscaping business. A customer paid you $120 in advance to mow his lawn while he was on vacation. You also performed landscaping services for a local business, but the business hasn't paid you the $390 fee yet. In addition, a customer paid you $130 cash for landscaping services. Answer the following questions about the correct way to account for your revenue under accrual accounting: 1. Name the accounts used to record these events. 2. Prepare the journal entries to record the three transactions. 1. Name the accounts used to record these events. (Leave unused cells blank.) 10arrow_forward
- In your opinion, why would an accountant be interested in adjusting some transactions before the Final Accounts are prepared? In financial accounting, if a supplier has sold you goods on credit, take us through the process you would go through to get it recorded in the Trial balance.arrow_forwardLucy must close the accounting books in the old system to have a complete set of financial statements to bring into the new system. How would you guide Lucy through the process of closing the accounting books in the old system? Explain.arrow_forwardThe owner of a small business selling and repairing cars which you patronise has justreceived a copy of his accounts for the current year.He is rather baffled by some of the items and as he regards you as a financial expert, he hasasked you to explain certain points of difficulty to him. This you have readily agreed to do. Hisquestions are as follows:(a) ‘What is meant by the term “assets”? My mechanical knowledge and skill is an asset to thebusiness but it does not seem to have been included.’(b) ‘The house I live in cost £30,000 five years ago and is now worth £60,000, but that is notincluded either.’(c) ‘What is the difference between “fixed assets” and “current assets”?’(d) ‘Why do amounts for “vehicles” appear under both fixed asset and current asset headings?’(e) ‘Why is the “bank and cash” figure in the balance sheet different from the profit for the yearshown in the profit and loss account?’(f) ‘I see the profit and loss account has been charged with depreciation on equipment…arrow_forward
- Your friend has come to you for advice on how to record a transaction in their accounting records for their proprietorship. 1) Use what you have learned in Chapter 4 to explain what is done at each step up to preparing the trial balance. 2) How would you go about detecting the error(s) if a trial balance resulted in total debits of $23,500 and total credits of $22,700arrow_forwardMr. Q started his own business. As it is a very small business with little investment and very less transactions, he does not want to hire any employees to record the transactions happening in the business. As he is not from an Accounting background, he finds it very difficult to understand how to classify the transactions and record. Some transactions are given to you to help him classify transactions category under A) Current Assets B) Current Liabilities C) Long term liabilities D) Long term Assets E) Contingent Liability. You are also required to guide him how you have classified a particular transaction by giving suitable reasons in the books of both the parties. i) Suppose Mr. A has purchased goods for using it in manufacturing from Mr. B on credit for RO 10,000. ii) Q’s company borrowed money from Bank Muscat promising to repay it after 2 years. iii) A Promised to deliver the goods to Mr.Z on July 1st 2020. Mr. Z paid the cash of RO. 2800 before the goods were delivered to…arrow_forwardBelow are several transactions for Scarlet Knight Corporation. A junior accountant, recently employed by the company, proposes to record the following transactions.Required: Assess whether the junior accountant correctly proposes how to record each transaction. If incorrect, provide the correction.arrow_forward
- Mr. A started his own business. As it is a very small business with little investment and very less transactions, he does not want to hire any employees to record the transactions happening in the business. As he is not from an Accounting background, he finds it very difficult to understand how to classify the transactions and record. Some transactions are given to you to help him classify transactions category under A) Current Assets B) Current Liabilities C) Long term liabilities D) Long term Assets E) Contingent Liability. You are also required to guide him how you have classified a particular transaction by giving suitable reasons in the books of both the parties. Suppose Mr. A has purchased goods for using it in manufacturing from Mr. B on credit for RO 5000. A’s company borrowed money from Bank Muscat promising to repay it after 2 years. A Promised to deliver the goods to Mr. Z on June 1st Mr. Z paid the cash of RO. 2,500 before the goods were delivered to him.…arrow_forwardMr. Tee ordered two computers which he is going to receive after 1 month. He is going to pay for the computers after their arrival. Besides, one of this computer is for his personal use at home. Should Mr. Tee record this transaction in the accounting book of the business? Give your explanations. Which accounting principle or assumptions should we apply here?arrow_forwardAs a bookkeeper of a new start-up company, you are responsible for keeping the chart of accounts up to date. At the end of each year, you analyze the accounts to verify that each account should be active for accumulation of costs, revenues and expenses. In July, the accounts payable clerk has asked you to open an account named “New Expenses”. You know that an account name should be specific and well defined. You feel that the A/P clerk might want to charge some expenses to that account that would not be appropriate. Why do you think the A/P clerk need this “New Expenses” account? Who needs to know this information and what action should you consider?arrow_forward
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
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