Question

C Gelomp ce ourses/34915/assignments/3638967 recreere EXC Pred Question 4 View Policies Current Attempt in Progress -12 James Company, a proprietorship, had the following selected business transactions during the year: In each situation, identify whether the accounting treatment is correct, incorrect or partially correct. 1. Land with a cost of $415,000 was recorded at its fair value of $465,000. A lease agreement to rent equipment from an equipment supplier starting next year was signed. The rent is $500 per month and the lease is for two years. Payments are due at the start of each month. Nothing was recorded in James Company's accounting records when the lease was signed. 3. James paid the rent for an apartment for the owner's personal use and charged it to Rent Expense. 4. James prepaid for a one-year insurance policy for $1,200. The amount was charged to Insurance Expense. 5. James included a note in its financial statements stating the company is a going concern. 6. James included a note in its financial statements stating the company is following ASPE. e Textbook and Media கவைட்டமாக

Answer 1

1 INCORRECT Land is valued at cost. If the land's market value increases over time, its value on the balance sheet remains at historical cost.If at a future date the land is sold due to a business relocation or other reason, the difference between the land's market value and its historical cost will result in a gain or loss disclosed on the income statement. 2 CORRECT Lease rent will be recorded when lease will start & payment will be due signing date of lease agreement is irrelevant for accounting entry. 3 INCORRECT since rent is paid for personal use of proprietor,it should be charged as drawing.if this would have been paid for business purpose then it can booked as rent. 4 INCORRECT since insurance is prepaid, its not related to cuurent year.it should be booked as an asset as prepaid expense instead of insurance expenses. 5 CORRECT 6 CORRECT