Chapter 1: 9RQ. (page 32)
What does the going concern assumption mean for a business?
Going concern assumption assumes that business will continue to operate for the foreseeable future.
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Tiny Town Kennel earns service revenue by caring for the pets of customers. Tiny
Town Kennel is organized as a corporation. During the past month, Tiny Town
Kennel has the following transactions:
a. Received \(520 cash for service revenue earned.
b. Paid \)325 cash for salaries expense.
c. Received a \(1,000 contribution in exchange for common stock.
d. Earned \)640 for service revenue, but the customer has not paid Tiny Town
Kennel yet.
e. Received utility bill of \(85, which will be paid next month.
f. Cash dividends of \)100 were paid to stockholders.
Indicate the effects of the business transactions on the accounting equation for Tiny
Town Kennel. Transaction (a) is answered as a guide.
Increase asset (Cash); Increase equity (Service Revenue)
Let’s examine a case using Greg’s Tunes and Sal’s Silly Songs. It is now the end of the first year of operations, and the stockholders want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and no dividends were paid. The businesses throw together the data shown on the next page at year-end: \( 23,000 8,000 35,000 22,000 \) 10,000 6,000 44,000 9,000 Total Assets Common Stock Total Revenues Total Expenses Greg’s Tunes: Sal’s Silly Songs: Total Liabilities Common Stock Total Expenses Net Income To gain information for evaluating the businesses, the stockholders ask you several questions. For each answer, you must show your work to convince the stockholders that you know what you are talking about.
Requirements 2. Which business owes more to creditors?
Using the following information, calculate the return on assets. Net income for November, 2018 $ 5,000 Total assets, November 1, 2018 76,000 Total assets, November 30, 2018 80,250
Question: Match the accounting terminology to the definitions. 3. Time period concept 4. Revenue recognition principle 5. Matching principle a. Requires companies to record revenue when it satisfies each performance obligation. b. Assumes that a business’s activities can be sliced into small time segments and that financial statements can be prepared for specific periods. c. Guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period, and matches those expenses against the revenues of the period
Michael McNamee is the proprietor of a property management company,Apartment Exchange, near the campus of Pensacola State College. The business has cash of \(8,000 and furniture that cost \)9,000 and has a marketvalue of \(13,000. The business debts include accounts payable of \)6,000. Michael's personal home is valued at \(400,000, and his personal bank accounthas a balance of \)1,200. Consider the accounting principles and assumptionsdiscussed in the chapter, and identify the principle or assumption that best matches the situation:
a. Michael's personal assets are not recorded on the Apartment Exchange's
balance sheet.
b. The Apartment Exchange records furniture at its cost of \(9,000, not its market
value of \)13,000.
c. The Apartment Exchange reports its financial statements in U.S. dollars.
d. Michael expects the Apartment Exchange to remain in operation for the
foreseeable future
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