Chapter 1: Q15DQ. (page 29)
Why is the revenue recognition principle needed? What does it demand?
Revenue recognition is a principle that states that revenue should be recognized when it is earned and its amount can be calculated correctly.
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Explain why investing (assets) and financing (liabilities and equity) totals are always equal.
Sanyu Sony started a new business and completed these transactions during December.
Dec. 1 Sanyu Sony transferred \(65000 cash from a personal savings account to a checking account in the name of Sony Electric in exchange for its common stock.
2 The company rented office space and paid \)1000 cash for the December rent.
3 The company purchased \(13000 of electrical equipment by paying \)4800 cash and agreeing to pay the \(8200 balance in 30 days.
5 The company purchased office supplies by paying \)800 cash.
6 The company completed electrical work and immediately collected \(1200 cash for these services.
8 The company purchased \)2530 of office equipment on credit.
15 The company completed electrical work on credit in the amount of \(5000.
18 The company purchased \)350 of office supplies on credit.
20 The company paid \(2530 cash for the office equipment purchased on December 8.
24 The company billed a client \)900 for electrical work completed; the balance is due in 30 days.
28 The company received \(5000 cash for the work completed on December 15.
29 The company paid the assistant’s salary of \)1400 cash for this month.
30 The company paid \(540 cash for this month’s utility bill.
31 The company paid \)950 cash in dividends to the owner (sole shareholder).
Required 3. Prepare the statement of cash flows for the current month.
Nina Niko launched a new business Niko’s Maintenance Co. that began operations on June 1. The following transactions were completed by the company during that first month.
June
1 Nina Niko invested \(130000 cash in the company in exchange for its common stock.
2 The company rented a furnished office and paid \)6000 cash for June’s rent.
4 The company purchased \(2400 of equipment on credit.
6 The company paid \)1150 cash for this month’s advertising of the opening of the business.
8 The company completed maintenance services for a customer and immediately collected \(850 cash.
14 The company completed \)7500 of maintenance services for City Center on credit.
16 The company paid \(800 cash for an assistant’s salary for the first half of the month.
20 The company received \)7500 cash payment for services completed for City Center on June 14.
21 The company completed \(7900 of maintenance services for Paula’s Beauty Shop on credit.
24 The company completed \)675 of maintenance services for Build-It Coop on credit.
25 The company received \(7900 cash payment from Paula’s Beauty Shop for the work completed on June 21.
26 The company made payment of \)2400 cash for equipment purchased on June 4.
28 The company paid \(800 cash for an assistant’s salary for the second half of this month.
29 The company paid \)4000 cash in dividends to the owner (sole shareholder).
30 The company paid \(150 cash for this month’s telephone bill.
30 The company paid \)890 cash for this month’s utilities.
Required 1. Create the following table similar to the one in Exhibit 1.9.
Enter the effects of each transaction on the accounts of the accounting equation by recording dollar increases and decreases in the appropriate columns. Do not determine new account balances after each transaction. Determine the final total for each account and verify that the equation is in balance.
Question: What type of accounting information might be useful to the marketing managers of a business?
Question: Part A. Identify the following questions as most likely to be asked by an internal (I) or an external (E) user of accounting information. 1. What are reasonable payroll benefits and wages? 2. Should we make a five-year loan to that business? 3. What are the costs of our product’s ingredients? 4. Do income levels justify the current stock price? 5. Should we spend additional money for redesign of our product? 6. Which firm reports the highest sales and income? 7. What are the costs of our service to customers?
Part B. Identify the following users of accounting information as either an internal (I) or an external (E) user. 1. Research and development director 2. Human resources director 3. Politician 4. Shareholder 5. Distribution manager 6. Creditor 7. Production supervisor 8. Purchasing manager
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