Concept explainers
Requirement -1
Rules of Debit and Credit:
Following rules are followed for debiting and crediting different accounts while they occur in business transactions:
- Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
- Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.
The revenue recognition principle:
The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) of the company is completed.
Deferred revenues:
Collection of cash in advance to render service or to deliver goods in future is known as unearned revenues. These unearned revenues are considered as liabilities until they are earned. For the portion of rendered services or delivered goods, revenues would be recognized by way of passing an
To describe: The time of revenue recognition from the sale of it season passesfor SW Incorporation.
Requirement - 2
To prepare: The appropriate
3.
To describe: The items which are included in the balance sheet and income statement.
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Intermediate Accounting
- TP5. LO 9.5 You own a construction company and have recently received a contract with the local school district to refurbish one of its elementary schools. You are given an up-front payment from the school district in the amount of $5 million. The contract terms extend from years 2018 to 2020. When would you recognize revenue for this payment? What method of accounting would you use for this construction project and why? What would be the benefits and challenges with your method selection? Give an example of your distribution selection and associated costs of the project (you may estimate based on other industry competitors). What might be some benefits and challenges associated with the other method of construction revenue recognition?arrow_forwardEB9. 12.4 Airplanes Unlimited purchases airplane parts from a supplier on March 19 at a quantity of 4,800 parts at $12.50 per part. Terms of the purchase are 3/10, n/30. Airplanes pays one-third of the amount due in cash on March 30 but cannot pay the remaining balance due. The supplier renegotiates the terms on April 18 and allows Airplanes to convert its purchase payment into a short-term note, with an annual interest rate of 9%, payable in six months.Show the entries for the initial purchase, the partial payment, and the conversion. EB10. 12.4 Use information from EB9. Compute the interest expense due when Airplanes Unlimited honors the note. Show the journal entry to recognize payment of the short-term note on October 18arrow_forwardPls answer number 9 with solutions QUELL Co. owes PUT DOWN Bank ₱4,000,000 plus accrued interest of ₱360,000. The unamortized discount on the loan is ₱80,000. The debt is a 10-year, 12% loan. During 20x1, QUELL’s business deteriorated due to loss of demand for its services. On December 31, 20x1, PUT DOWN Bank agrees to accept old equipment and cancel the entire debt. The equipment has a cost of ₱12,000,000, accumulated depreciation of ₱8,800,000, and fair value of ₱3,600,000. How much is the gain (loss) on the extinguishment of the debt? a. 1,800,000 c. 760,000 b. (1,800,000) d. 1,080,000arrow_forward
- block d/2019/4 Würstchen Uli GmbH is a food retailer that is in economic difficulties due to tax arrears from the past and therefore wants to report the highest possible annual result in t1 . Create the postingrecords for the following transactions in t1: Würstchen Uli GmbH is purchasing a new copying machine in t1, which will be used in administration in the future. The purchase price according to the list is € 17,850 gross. Afurther € 5,950 gross must be paid to the manufacturer for delivery and installation on site. The amount due will be paid by bank transfer. The expected service life of the machine is estimated at 5 years. Due to the expected high utilisation in t1, Würstchen Uli GmbH is only considering a geometrical-declining balance or straight-line depreciation as scheduled depreciation . Show your solution comprehensibly. The Würstchen Uli Gmbh has on 5.1.t0 for 50.000 € for the purpose of short-term speculation securities in the Katari Ltd. whose carrying…arrow_forwardPST = 7% and GST = 5% Frederick Easton Edison purchases a television from Company F on August 15. He can either pay for the television set at the time of purchase, or purchase it on the company's buy-now, pay-later plan. He chooses to purchase it on the company's buynow, pay-later plan. On the buy-now, pay-later plan, the price is $1995.95 (plus taxes). At the time of purchase, Frederick must pay the taxes and a $40 administration fee. He has one year to pay for his purchase. If he pays during this time period, he will not be charged interest. After one year, Company F charges customers 2.25% simple interest per annum, charged monthly, on any outstanding amount. Assume that he is charged interest from the date of purchase on the outstanding amount. How much will Frederick pay for the television if he pays the entire amount on September 15 of the following year?arrow_forwardProblem 7-22 Adoption Expenses (LO 77) Carl and Jenny adopt a Korean orphan. The adoption takes 2 years and two trips to Korea and is finalized in 2021. They pay $7,000 in 2020 and $7,500 in 2021 for qualified adoption expenses. In 2021, Carl and Jenny have AGI of $150,000. If required, carry any division out to four decimal places and round final answers to the nearest dollar. Question Content Area a. What is the adoption credit Carl and Jenny can claim in 2021? b. How much credit could they claim if their AGI was $221,660?arrow_forward
- A6 Question content area top Part 1 If you save $1,200 at the beginning of every year for ten years, for how long can you withdraw $1,980 at the beginning of each year starting ten years from now, assuming that interest is 9% compounded annually? State your answer in years and months (from 0 to 11 months). You can withdraw $1,980 for ------year(s) and -----month(s). type whole numberarrow_forwardDillip Lachgar is the president and majority shareholder of Argon Inc., a small retail chain store. Recently, Dillip submitted a loan application for Argon Inc. to Compound Bank. It called for a 600,000, 9%, 10-year loan to help finance the construction of a building and the purchase of store equipment, costing a total of 750,000. This will enable Argon Inc. to open a store in the town of Compound. Land for this purpose was acquired last year. The bank's loan officer requested a statement of cash flows in addition to the most recent income statement, balance sheet, and retained earnings statement that Dillip had submitted with the loan application. As a close family friend, Dillip asked you to prepare a statement of cash flows. From the records provided, you prepared the following statement: Argon Inc. Statement of Cash Flows For the Year Ended December 31, 20Y7 Cash flows from operating activities: Net income.................................................... 300,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation................................................ 84,000 Gain on sale of investments.................................. (30,000) Changes in current operating assets and liabilities: Decrease in accounts receivable............................ 21,000 Increase in inventories..................................... (42,000) Increase in accounts payable............................... 30,000 Decrease in accrued expenses payable...................... (6,000) Net cash flow from operating activities.......................... 357,000 Cash flows from (used for) investing activities: Cash from investments sold..................................... 180,000 Cash used for purchase of store equipment..................... (120,000) Net cash flow from investing activities........................... 60,000 Cash flows from (used for) financing activities: Cash used for dividends........................................ (126,000) Net cash flow used for financing activities........................ (126,000) Increase (decrease) in cash......................................... 291,000 Cash at the beginning of the year................................... 108,000 Cash at the end of the year......................................... 399,000 After reviewing the statement, Dillip telephoned you and commented, Are you sure this statement is right?" Dillip then raised the following questions: 1. How can depreciation be a cash flow?" 2. Issuing common stock for the land is listed in a separate schedule. This transaction has nothing to do with cash! Shouldn't this transaction be eliminated from the statement?" 3. How can the gain on the sale of investments be a deduction from net income in determining the cash flow from operating activities? 4. Why does the bank need this statement anyway? They can compute the increase in cash from the balance sheets for the last two years." After jotting down Dillip's questions, you assured him that this statement was right." But to alleviate Dillip's concern, you arranged a meeting for the following day. a. How would you respond to each of Dillip's questions? b. Do you think that the statement of cash flows enhances the chances of Argon Inc. receiving the loan? Discuss.arrow_forwardExercise 5-16 (Algo) Deferred annuities [LO5-8] President Company purchased merchandise from Captain Corporation on September 30, 2024. Payment was made in the form of a noninterest-bearing note requiring President to make six annual payments of $7,800 on each September 30, beginning on September 30, 2027. Required: Calculate the amount at which President should record the note payable and corresponding purchase on September 30, 2024, assuming that an interest rate of 9% properly reflects the time value of money in this situation. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. Round your intermediate calculations to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA ofarrow_forward
- 1. (LO3) Installment Sale Zachary Davis owns several apartment buildings in Los Angeles and has an offer from a business associate, Ace Arnold, to purchase one of the buildings on October 31, 2021. Ace does not have the money to purchase the apartment building outright and offers to pay Zachary over a five-year period beginning next year. Zachary is leery, but he contacts his attorney to draw up a contract with the following information: • Sales price $500,000 • Payments of $100,000 each, to be made on January 1 of 2022, 2023, 2024, 2025, and 2026 • Interest rate 6%, semiannual compounding beginning January 1, 2022. Zachary had paid $385,000 for the building and its adjusted basis as of October 31, 2021 is $351,400. He would like you to prepare his 2021 tax return and believes he should not have to pay any tax on the sale until 2026 when he receives the final payment. Prepare a response to Zachary and the file.arrow_forward(M1) Problem 8-79A (Algorithmic) Warranties Mason Auto Repair specializes in the repair of foreign car transmissions. To encourage business, Mason offers a 6-month warranty on all repairs. The following data are available for 2019: Transmissions repaired, 2019 3,400 Expected frequency of warranty claims 0.03 per repair Actual warranty claims, 2019 $38,000 Estimated warranty liability, 1/1/19 $30,200 Estimated cost of each warranty claim $340 Assume that warranty claims are paid in cash. Required: Question Content Area 1. Compute the warranty expense for 2019. $fill in the blank 84c914063045079_1 Question Content Area 2. Prepare the entry to record the payment of the 2019 warranty claims. blank - Select - - Select - (Record payment of claims) Question Content Area 3. Conceptual Connection: What is the December 31, 2019, balance in the estimated warranty liability account? $fill in the blank 86ed56039fddf91_1 Why has the balance in the estimated warranty liability account changed from…arrow_forwardProblem 9-24 (LO. 3) Kristen, an independent management consultant, is based in Atlanta. During March and April of 2020, she is contracted by a national hardware chain to help implement revised human resource policies in Jackson (Mississippi) temporarily. During this period, Kristen flies to Jackson on Sunday night, spends the week at the district office, and returns home to Atlanta on Friday afternoon. The cost of returning home is $550, and the cost of spending the weekend in Jackson would have been $490. a. Presuming no reimbursement for these expenses, how much, if any, of these weekend expenses may Kristen deduct?$fill in the blank 9570f9fe1fa5079_1 b. What would your answer be if the amounts involved were reversed (i.e., the trip home would have cost $490; staying in Jackson would have been $550)? Kristen may deduct $fill in the blank 05a4acfc8fd204e_1 as weekend expenses.arrow_forward
- Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningAccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,