Question

25/34918/assignments/3638945 View Policies Current Attempt in Progress 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. 2 Alease 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 Attempts: 0 of 3 used Submit Ar Save for later

Answer 1

1.even if fair value is more than cost of land,it should be shown it books at hostorical cost only.hence the jame'saccounting treatment is wrong.

2.as said in agreement the rent will start to due is in next year only,hence nothing required to show in current years accounts,hence the current accounting treatment is correct.

3.as the rent paid is for personal using apartment,hence the rent paid cannot debit to copanies rent account,as company and the owner is defferent.hence the given accounting treatment is wrong.

4.the insurance is taken for his personal and this is a personal expense,hence it cannot charge to companies expenses and the given accounting treatment is wrong.

5.going concern is a one of the fundamental accounting principle,,hence the same not required to mention seperately,it is pressumed that it followed the fundamental accounting principle,so no requirement to mention seperatly.but if do so it is not wrong.

6.it iscorrect accounting traetment as it required to mention.