Accounting ACCT 2610 Chapter Notes - Chapter 3: Earnings Before Interest And Taxes, Matching Principle, Weighted Arithmetic Mean

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oliveleopard31

19 Sep 2016

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Document Summary

The long term objective for any is to turn cash into more cash. Companies acquire inventory and the services of employees. The operating (cash-to-cash) cycle is the time it takes for a company to pay cash to suppliers, sell goods and services to customers, and collect cash from customers. The time period assumption indicates that the long life of a company can be reported in shorter time period. Revenues are increases in assets or settlements of liabilities from ongoing operations. Operating revenues result from the sale of goods or services. When the company provides the good or service, then the revenue is recognized. Expenses are outflows or the using up of assets or increases in liabilities from ongoing operations incurred to generate revenues during the period. An expenditure is any outflow of cash for any purpose. Not all expenditures are expenses, but expenses are necessary to generate revenue. Operating revenues - operating expenses = operating income.

Related Questions

Anderson Accounting Services LLC provides accounting and tax preparation and consulting services. Sometimes customers only wish to have financial statements and/or tax returns prepared. Sometimes customers bundle accounting and tax preparation with consulting services (to be provided over a period of time). Sometimes customers only wish to have consulting services provided over a period of time. Because Anderson is a service firm there is no cost of goods sold associated with their services.

Customer is Civic Corporation	1
Tax consulting begins on November 1st and runs through the next April	11/1/X7
Date of contract	11/1/X7
Length of consulting services	6 months	months
Tax return preparation occurs over the period February through April of	20X8
Length of tax prepartion	3 months
Price of tax preparation to be allocated over the return preparation period	$ 2,000	stand alone price
Price of consulting services to be allocated over consulting period	$ 5,000	stand alone price
Customers are charged a lesser amount as follows for both tax and consulting	$ 6,000
Anderson Accounting Services LLC's current year end	12/31/X7
Customers pay at the contract date for BOTH the consulting and tax preparation services.

What are the performance obligations in the contract?

Tax preparation services

Tax preparation services and tax consulting services

Unable to determine

D.Tax consulting services

QUESTION 3

Determine the transaction price that should be allocated to the consulting services.

	A.	$4,286
	B.	$1,714
	C.	$1,429
	D.	$4,571

QUESTION 4

Calculate the total revenue that should be recognized in the current accounting period.

	A.	$4,571
	B.	$1,714
	C.	$1,429
		D. $4,286

QUESTION 5

What is the total amount in the deferred revenue account(s) at the end of the current accounting period?

	A.	$1,714
	B.	$4,571
	C.	$4,286
	D.	$1,429

QUESTION 6

What is the total amount of revenue that should be recognized in the NEXT accounting period period?

	A.	$1,714
	B.	$4,286
	C.	$1,429
	D.	$4,571

QUESTION 7

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Deferred Revenue XXX

	A.	No impact
	B.	Decrease
	C.	Increase

QUESTION 8

The following journal entry has what impact on the income statement?

Debit Cash XXX

Credit Accounts Receivable XXX

	A.	No impact
	B.	Increase
	C.	Decrease

QUESTION 9

Revenue is defined as:

An inflow or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entityâs ongoing major or central operations.

Revenue is recognized from the settlement of which of the following liabilities:

	A.	Discount on Bonds Payable
	B.	Deferred Revenue
	C.	Salaries Payable
	D.	Accrued Interest

QUESTION 10

A customer must have "control" over the good or service in order for a performance obligation to be considered as having been satisfied for purposes of revenue recognition.

	A.	TRUE
	B.	FALSE

Accounting Conceptual Framework.

For each of the following(A-E), Identify which level three accounting assumption or principal is being violated, and then indicate what should be done to rectify the violation. Select the best assumption or principal. If the below accounting practice is correct, identify it as being correct, and in that case, you are not required to do anything :-

A) Bowbells company purchased a building for 150,000 on March 3rd, 2017, and on the year end balance sheet as of December 31st reports the land at its fair market value of 1,000,000.

B) When flaxton company purchases inventory it debits cost of goods sold instead of merchandise inventory.

C) Columbus company recieves orders from customers and records revenue at that time, even though it has not yet delivered products or services to its customers.

D)Noonan company prepares financial statements only every three years to reduce its costs of preparing the finanacial statements.

E) The CEO and sole owner of portal company purchased a new vehcile soley for her personal use and the portal company made the following entry: debit to vehicle expense and credit to cash. Portal is Sole propritorship.