Question

The following are independent situations. a. A company orders and receives 10 personal computers for office use for which it signs a note promising to pay $20,000 within three months b. A company purchases for $24,000 cash a new delivery truck that has a list (sticker) price of $27.000. c. A women's clothing retailer orders 30 new display stands for $330 each for future delivery d. A new company is formed and issues 100 shares of stock for 312 per share to investors. e. A company purchases a piece of land for $53,000 cash. An appraiser for the buyer valued the land at $56,100 f. The owner of a local company uses a personal check to buy a $11,500 car for personal use. Answer from the company's point of view. g. A company borrows $3,500 from a local bank and signs a six-month note for the loan. h. A company pays $1.800 owed on its ten-year note payable (ignore interest). Required 1. Indicate itles of the appropriate accounts. if any, affected in each of the preceding events. Consider what the company gives and receives Received (c (d th) 2-a. At what amount would you record the delivery truck in (b)?

Answer 1

2-a)

$24,000

Explanations:

Cash is paid for $24,000 only and as per double accounting method, delivery truck should be recorded at $24,000 to balance the deduction of $24,000 from cash.

2-b)

$53,000

Explanations:

Cash is paid for $53,000 only and as per double accounting method, piece of land should be recorded at $53,000 to balance the deduction of $53,000 from cash.

2-c)

These are applications of Cost Principle.

Explanations:

Fixed assets should always record at the cost price only.

3-a)

The agreement in (c) involves no exchange or receipt of cash, goods, or services and thus is not a transaction.

Explanations:

Ordering any item does not have impact on the books of accounts and hence, it is not recorded.

3-b)

Because transaction (f) occurs between the owner and others, the separate entity assumption implies this transaction does not affect the business.

Explanations:

The transactions relating to owner's personal should not have any impact on the business of that owner, hence, it will not recorded.