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was due inancial State nc. should report

was due inancial State nc. should report

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 92PSA
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### Handling Utilities Expense in Financial Statements **Scenario:** - **Date Received:** December 28, 2019 - **Amount Owed:** $1,900 for December 2019 utilities - **Payment Date:** January 27, 2020 **Objective:** On the financial statements dated December 31, 2019, Concord, Inc. needs to report the correct expenses and liabilities related to the utilities bill. ### Options for Reporting **Option 1:** - **Balance Sheet:** Utilities Payable of $1,900 - **Income Statement:** Utilities Expense of $1,900 **Option 2:** - **Balance Sheet:** Utilities Expense of $0 - **Income Statement:** Utilities Payable of $0 **Option 3:** - **Balance Sheet:** Prepaid Expenses of $1,900 - **Income Statement:** Utilities Expense of $1,900 **Option 4:** - **Balance Sheet:** Utilities Payable of $0 - **Income Statement:** Utilities Expense of $0 ### Explanation of the Correct Reporting: For the period ending December 31, 2019, Concord, Inc. should recognize the utilities expense incurred in December even though it will be paid in January. - The appropriate entry on the **Balance Sheet** would be: - **Utilities Payable of $1,900**, because the expense has been incurred but not yet paid. - The appropriate entry on the **Income Statement** would be: - **Utilities Expense of $1,900**, because the cost pertains to the reporting period of December 2019. ### Conclusion: The correct reporting for the financial statements of Concord, Inc. on December 31, 2019, should show the incurred utilities expense and the corresponding payable amount, as detailed in **Option 1**: - **Utilities Payable of $1,900 on the Balance Sheet** - **Utilities Expense of $1,900 on the Income Statement** This ensures the financial statements accurately reflect the company's liabilities and expenses for the period ending December 31, 2019.
Transcribed Image Text:### Handling Utilities Expense in Financial Statements **Scenario:** - **Date Received:** December 28, 2019 - **Amount Owed:** $1,900 for December 2019 utilities - **Payment Date:** January 27, 2020 **Objective:** On the financial statements dated December 31, 2019, Concord, Inc. needs to report the correct expenses and liabilities related to the utilities bill. ### Options for Reporting **Option 1:** - **Balance Sheet:** Utilities Payable of $1,900 - **Income Statement:** Utilities Expense of $1,900 **Option 2:** - **Balance Sheet:** Utilities Expense of $0 - **Income Statement:** Utilities Payable of $0 **Option 3:** - **Balance Sheet:** Prepaid Expenses of $1,900 - **Income Statement:** Utilities Expense of $1,900 **Option 4:** - **Balance Sheet:** Utilities Payable of $0 - **Income Statement:** Utilities Expense of $0 ### Explanation of the Correct Reporting: For the period ending December 31, 2019, Concord, Inc. should recognize the utilities expense incurred in December even though it will be paid in January. - The appropriate entry on the **Balance Sheet** would be: - **Utilities Payable of $1,900**, because the expense has been incurred but not yet paid. - The appropriate entry on the **Income Statement** would be: - **Utilities Expense of $1,900**, because the cost pertains to the reporting period of December 2019. ### Conclusion: The correct reporting for the financial statements of Concord, Inc. on December 31, 2019, should show the incurred utilities expense and the corresponding payable amount, as detailed in **Option 1**: - **Utilities Payable of $1,900 on the Balance Sheet** - **Utilities Expense of $1,900 on the Income Statement** This ensures the financial statements accurately reflect the company's liabilities and expenses for the period ending December 31, 2019.
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