Which of the following items is an implicit transaction? Recognizing a gain on the sale of equipment Recording payment o...
Which of the following items is an implicit transaction?
Recognizing a gain on the sale of equipment
Recording payment of monthly interest on loan
Recognizing impairment on an intangible asset
Recognizing deferred revenue through delivery of goods
Homework Answers
Solution: Which of the following items is an implicit transaction?
Correct Option is : Recording payment of monthly interest on loan
Explanation: Implicit transaction represents an opportunity cost that arises when a company uses internal resources toward a project without any explicit compensation for the utilization of resources. This means when a company allocates its resources, it always forgoes the ability to earn money off the use of the resources elsewhere, so there's no exchange of cash.
The opportunity cost for the business is the monthly interest payments on the loan. If the businesses would have started, there would have been a saving in the interest cost of the loan.
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On January 1, 2017, Sheffield Company contracts to lease
equipment for 5 years, agreeing to make a payment of $109,913 at
the beginning of each year, starting January 1, 2017. The leased
equipment is to be capitalized at $466,000. The asset is to be
amortized on a double-declining-balance basis, and the obligation
is to be reduced on an effective-interest basis. Sheffield’s
incremental borrowing rate is 6%, and the implicit rate in the
lease is 9%, which is known by Sheffield....
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Ivanhoe Limited organized late in 2019 and set up a single account for all intangible assets. The following summary shows the entries in 2020 (all debits) that have been recorded in Intangible Assets since then: Jan. 2 Purchased patent (8-year life) $338,000 Mar. 31 Costs to search for new ways to apply patent that was purchased on Jan. 2 21,000 Apr. 1 Purchased goodwill (indefinite life) 314,000 July Purchased franchise with 10-year life; expiration date July 1, 2030 257,000 1...
Recording Assurance-Type Warranty Liability Finisher Inc. sells merchandise for $450,000 in 2020 that includes a three-year limited warranty, Warranty costs are estimated to be 19 of sales. The company incurred actual costs of $1,440 in 2020 related to the warranties. a. Record the warranty accrual at the time of sale in 2020. b. Record the adjustment to the warranty accrual for actual warranty costs in 2020. Account Name Cr. . 0 0 D 0 b. 0 0 E pepe cen...
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Which of the following statements is correct? O The entry to record the payment of an invoice within the cash discount period would include a debit to the Purchases Discounts account. O To record a cash purchase of merchandise, the accountant would debit Purchases and credit Cash O A transaction that is properly recorded in the cash payments journal will always include the recording of an amount in the Cash Debit column. O Purchase discounts is a contra revenue account.
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