For the following transactions, identify which principle, constraint, or assumption would apply:
Question 2
(10 marks)
Ace Accounting’s financial records include the following accounts:
Required:
Question 3
(10 marks)
West Coast Ltd.’s board of directors held a board meeting to discuss the 2017 financial results. Later on, the board would release the financial statements to its shareholders. One particular topic that they discussed is detailed below.
Company president, Tony Edwards, stated that 2017 was not a successful year financially. With expenses exceeding revenues, West Coast Ltd. would have to report a large loss in 2017, adding to the company’s last 5 years of losses reported. Since another year of losses would not satisfy the company’s shareholders, Tony Edwards suggestion that, for a limited time only, he personally could transfer shares, which he bought in 2012 for $ 1 million and are now worth $ 10 million, to West Coast Ltd. to increase the value of West Coast Ltd.’s balance sheet. The president then added that the chief financial officer, Tina Brown, could eliminate $ 1 million in expenses. Then, West Coast Ltd. could go to the bank for refinancing.
Tina Brown disagreed with the president’s recommendations, stating that generally accepted accounting principles would not allow it.
Required:
Question 4
(40 marks)
Jeff Ground is the manager/owner of a landscaping business named Ground Rules. The following summarized Ground Rules’ financial position on October 01, 2018:
Accounts Accounts Owner’s
Cash + Receivable Supplies + Land + Payable + Equity
Bal. 35,000 20,000 100,000 45,000 110,000
Ground Rules transacted the following during October 2018:
Required:
Question 6
(20 marks)
Janet Jones is a professional gym instructor. She started her own business, Janet’s Gym, a proprietorship, in 2014. Consider the following facts, as of December 31, 2018:
Required:
As HOMEWORKLIB RULES quidlines, only the first question is to be answered in case of muliple question and hence first answer will be as follows:
A : GOING CONCERN
As per this assumption,the partnership firm will continue to operate indefinitely until it provides evidence to contarary. It is the assumption that an entiry will remain in the business for the forseeable future. The auditor evaluates an entity's ability to continue as going concern for a period not grater than one year following the date of the financial statements being audited.
B : ACCRUAL
All the accounting transactions are recorded in the books of accounts as and when they actually occur rather than in the periods when there are cash flows associates with them. It is important for the financial statements that what actually happened in the accounting period rather than the cash received in next financial year.
C : MATCHING
This is the concept that when you record revenue, you should also recognise all the expenses at that time and thereby charging the same to cost of goods sold so that he finacial statements shows true and correct view and help in the decision making. Hence Accountant should not ignore the expenses and book at the same time.
D: MONETARY UNIT / MONEY MESUREMENT
All the transactions in the books of accounts are recorded in monetary terms and hence cost to implement a new system will be capitalised and the benefit arising through the implementatiom of the new system will not be recorded in the books of accounts as the same can not be measured in value.
E: SEPARATE BUSINESS ENTITY
A business is accounted for separately from any other business including its owner. Personal transactions of the owner should not be entered. In oher terms, business and owners both are considered as separate persons
F: HISTORICAL COST
Under this concept, an asset is recorded at a price that is paid to acquire and hence at cost and this cost is the basis for all the subsequent periods. Fixed Assets are then shown Cost less Depreciation in the books of accounts, though the value of fixed assest has been incresed after its purchase.Current Assets are valued at cost price or market value whiever is less. Hence Accounting generally ignores th effect of inflation.
For the following transactions, identify which principle, constraint, or assumption would apply: Assume a partnership’s business...
Question 6 (20 marks) Janet Jones is a professional gym instructor. She started her own business, Janet’s Gym, a proprietorship, in 2014. Consider the following facts, as of December 31, 2018: Janet’s Gym owned a small gym, which it acquired for $ 600,000 in 2018; the land was worth $ 500,000, and the building was worth $ 100,000. The business took out a $ 520,000 mortgage, and Janet Jones contributed the remaining $ 80,000 cash to buy the property. In...
Following are the financial statement data for Jones Temporary Services at December 31, 2018. Prepare Degen’s income statement, statement of owner’s equity and balance sheet. Accounts Payable 10,000 Accounts Receivable 36,000 Cash 65,000 Repairs Expense 1,250 Prepaid Insurance 3,000 Jones, Capital, 1/1/18 53,000 Contributions by Jones 5,000 Rent Expense 24,000 Utilities Expense 1,000 Fees Earned 63,000 Telephone Expense 750
Carla Carpenter Car Wash Company had the following business transactions during October 20xx, the first month of business activity. Carla earns revenue by washing automobiles and busses. All transactions relate to the affairs of the business: a) On October 1st, Carla deposits $30,000 in a bank account in the name of Carla Carpenter Car Wash Company b) On October 3, Carla buys equipment on account for $12,000 c) On October 10th, Carla pays $130.00 for supplies. d) On October 15th,...
Identify which accounting principle or assumption best describes each of the following practices: 1. Stark Company's accounting system maintains the equipment account as if the business will continue operating and not close. 2. Mike Derr owns both Salling Passions and Dockside Digs. In preparing financial statements for Dockside Digs, Mike makes sure that the expense transactions of Sailing Passions are kept separate from Dockside Digs's transactions and financial statements. 3. If $51 thousand cash is paid to buy land, the...
Alert Security Services Co. offers security services to business clients. The adjusted trial balance is presented below. Alert Security Services Co. End-of-Period Spreadsheet For the Year Ended October 31, 2016 1 Adjusted Adjusted 2 Trial Balance Trial Balance Income Statement Income Statement Balance Sheet Balance Sheet 3 Debit Credit Debit Credit Debit Credit 4 Cash 12.00 5 Accounts Receivable 103.00 6 Supplies 4.00 7 Prepaid Insurance 2.00 8 Land 190.00 9 Equipment 50.00 10 Accumulated Depreciation-Equipment 7.00 11 Accounts Payable...
Evan Harrison Company operates four bowling alleys. The business just received the October 31, 2018, bank statement from City National Bank, and the statement shows an ending balance of S925. Listed on the statement are an EFT ren collection of S400, a service charge of S8, NSF checks totaling S85, and a $20 charge for printed checks. In reviewing the cash records, the business identified outstanding checks totaling $470 and a deposit in transit of $1,785. During October, the business...
Retail operations and retail inventory ‘Kites Galore’ began business on 1 October 2019. The business is owned and operated by Harry Smith as a sole-trader. The business will sell kites via an online store. The business is registered for GST. The following transactions occurred during October 2019: Date: Details: 1 Oct Harry Smith deposited $20,000 into the business bank account. 5 Oct Kites Galore purchased of 50 kites on account for $2,750 ($55 per kite, including GST) from the kite...
The following transactions occurred in June 2018 for Borderline Ltd JuneReceved a cheque for S1 200 from Roar Ltd in full settlement of its account and deposited it in the bank account Sold inventory for $905(before any discounts have been applied) to Jones Ltd on credit (the company was given a trade discount of $80, then the normal credit terms) COGS was $420 Paid rent for June S1 500, chq no. 561 (Assume the rent is GST free) Purchased inventory...
Exercise 1-3A Identify account classifications and business activities (LO1-2) Wildcat Corporation has the following transactions with Falcon Incorporated. points Required: 1., 2., & 3. For each transaction, indicate whether Wildcat would report the related account in the balance sheet or income statement For accounts in the balance sheet, indicate whether it would be classified as an asset, liability, or stockholders' equity. For accounts in the income statement, indicate whether it would be classified as a revenue or an expense. Indicate...
1.Which of the following is not a principle financial statement? a. Group of answer choices b. Income Statement c. Statement of Resources Owned d. Statement of Owner’s Equity e. Statement of Cash Flows f. Balance Sheet 2. Transactions affecting owner's equity include: a. owner's investments and payment of liabilities b. owner's investments and owner's withdrawals, revenues, and expenses c. owner's investments, revenues, expenses, and collection of accounts receivable d. owner's withdrawals, revenues, expenses, and purchase of supplies on account 3....