ACCOUNTG 221 Chapter 2: Acc221- Note CH2

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maroongoldfish150

2 Feb 2019

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Cash basis accounting recognize (report) revenues and expenses in the period in which cash is collected or paid. Accounts receivable- represents the amount of cash the company expects to collect in the future (under assets column) Because the revenue recognition causes assets (account receivable) to increase, it is classified as an asset source transaction. Because cash was not collected or paid, the statement of cash flows is not affected. Example: cato collected ,000 cash from customers in partial settlements of its accounts receivable. The collection of an account receivable is an asset exchange transaction- a transaction such as the purchase of land with cash, that decreases one asset and increases the other; total asset remains unchanged. The revenue was recognized when the work was done. Accrued expenses- expenses that are recognized before cash is paid. Adjusting entry- the entry that updates account balance prior to preparing financial statements; adjusting entry never affected the cash account.

Related Questions

Exercise 3-2 Blossom Company entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $33,500 in the business in exchange for common stock of the company 2. Purchased computers for office use for $27,200 from Ladd on account. 3. Paid $3,700 cash for May rent on storage space. 4. Performed computer services worth $18,000 on account. 5. Performed computer services for Wharton Construction Company for $3,200 cash. 6. Paid Western States Power Co. $8,900 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $1,700 on account. 9. Received $13,700 cash from customers for contracts billed in (4). Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholdersâ Equity in the far right column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-3 for example.) Assets = Liabilities + Stockholdersâ Equity Cash + Accounts Receivable + Equipment = Accounts Payable + Common Stock + Retained Earnings Revenues - Expenses (1) $ $ $ $ $ $ $ (2) (3) (4) (5) (6) (7) (8) (9) $ $ $ = $ $ $ $

harlequinraven630

Clayton Computers was started in 2014. The company experiencedthe following accounting events during its first year ofoperation.

1. Started business when it acquired $25,000 cash from the issueof common stock.

2. Purchased merchandise with a list price of $23,000 onaccount, terms 2/10, n/30.

3. Paid off one-half of the accounts payable balance within thediscount period.

4. Sold merchandise on account that had a list price of $24,000.Credit terms were 1/20, n/30. The merchandise had cost ClaytonComputers $14,000.

5. Collected cash from the account receivable within thediscount period.

6. Paid $1,700 cash for operating expenses.

7. Paid the balance due on accounts payable. The payment was notmade within the discount period.

Questions:

A.) Record the events in a horizontal statements model below. Inthe Cash Flows column, use the letters OA to designate operatingactivity, IA for investing activity, FA for financing activity, NCfor net change in cash and NA to indicate accounts not affected bythe event. The first event is recorded as an example.

B.) What is the amount of gross margin for the period?

C.) What is the net income for the period?

burgundywolf241

The period end adjusting entry for bad debt expense under the allowance method is

	Cash, debit; Accounts Receivable/customer name, credit.
	not required.
	Bad Debt Expense, debit; Accounts Receivable/customer name, credit.
	Bad Debt Expense, debit; Allowance for Uncollectible Accounts, credit.

Bach Instruments had total assets of $560,000; total liabilities of $250,000; and total Stockholders' Equity of $310,000. Bach's debt ratio is

44.6%.

28.7%.

80.6%.

55.4%.

The entry to record selling 300 shares of stated value $60 common stock for $70 per share would be

	debit Cash $21,000; credit Common Stock $18,000; credit Paid-in Capital in Excess of Stated Valueâ$3,000.
	debit Cash $21,000; credit Common Stock $21,000.
	debit Cash $18,000; debit Paid-in Capital in Excess of Stated Valueâ$3,000; credit Common Stock $21,000.
	debit Cash $18,000; credit Common Stock $18,000.

The Statement of Cash Flows reports the sources and uses of cash from all of the following EXCEPT

financing activities.

managerial activities.

operating activities.

On the Income Statement, the results of discontinued operations are reported

immediately after the extraordinary items section.

before the operating income section.

as part of other income (expense).

net of income tax or net of income tax savings.

By NOT accruing warranty expense

reported expenses will be understated, and net income will be understated.

reported expenses will be overstated, and reported liabilities will be understated.

reported liabilities will be understated, and net income will be overstated.

reported liabilities will be overstated, and net income will be understated.

The adjusting entry to record incurred but not yet paid employee wages includes

	a debit to Cash.
	a debit to Wages Payable.
	a debit to Wages Expense.
	a debit to Wages Earned.

The type of stock that does NOT carry paid-in capital in excess of par is called

	par stock.
	stated value stock.
	no-par stock.
	outstanding stock.

investing activities.

What was the percentage of change in Accounts Receivable if the balance was $80,000 in 2013 and $60,000 in 2014?

	+25.00%.
	+33.33%.
	-25.00%.
	-33.33%.

In accounting, what is the meaning of capitalized?

	Capitalized means that an asset account is debited (increased) for the cost of an asset.
	Capitalized means that the cost of an asset is recorded as a debit (increase) to expense.
	Capitalized means that a given city has been selected as a government center.
	Capitalized means that a liability account is credited (increased) for the cost of an asset.

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ACCOUNTG 221 Chapter 2: Acc221- Note CH2

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