Homework Answers
Solution
Revenue has to be recorded only when it is earned. In the given case, the company has just taken up the 18 month job. It has not yet provided its service. Therefore the advance of $ 10000 received by it would be its liability as it is yet to provide services for the money received. The advance received cannot be recorded as revenue.
Therefore, the net income has been overstated, the asset remains unaffected and the liability has been understated.
The first option is the solution.
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1- Under IFRS, which of the following is generally
not a guideline for recognizing revenue?
The transaction price is determinable.
When (or as) the company satisfies the performance
obligation.
The contract is identified with the client.
Collection is reasonably assured.
2- If Bee Corp. fails to adjust the Unearned Rent account for
rent that has been earned, what effect will this have on that
month’s financial statements?
Liabilities will be understated and revenues will be
understated.
Assets will be understated...
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please show work.
2. In 2019, the bookkeeper for a company mistakenly recorded an entry for a two-year contract as cash basis rather than accrual basis and made no adjustment at year-end. The mistake was not caught and resulted in the following errors: Assets 12/31/19 NE Assets 12/31/20 NE Assets 12/31/21 NE Liabilities 12/31/19 NI 2019 Equity 12/31/19 Understated - $765,000 Overstated - $765,000 Overstated - $765,000 Liabilities 12/31/20 NI 2020 Equity 12/31/20 Understated - $225,000 Understated - $540,000 Overstated...
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