Your interpretation of the guidance: The correct recognition of the $25,000 start up expenditures will be: as an asset as an expense
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
There are two research cases in this assignment. This assignment must be completed by 9:00 a.m. Monday, November 8, 2021. You will submit your answer directly on D2L. You may submit your response in either of the following ways: 1) following the link for the extra credit assignment under Submissions in this week’s content or 2) alternatively, you may follow the link at the top of D2L to Research and Exams. Select Research Assignment #5. (Don’t worry that D2L calls this submission a quiz).
You will enter the Topic, Subtopic, Section, Paragraph in a fill in the blank question and your overall conclusion to this case. Example: ASC 100-10-45-4 (you do not need to enter what the guidance content)
Research Case #1:
Peronto’s Inc. is an asphalt contractor located in Kansas City, Mo. Peronto’s Inc. is planning on expanding into the Chicago market is budgeting that the start-up expenditures for the new Chicago facilities will be $25,000. These expenditures will be for the location of a new facility and the incremental expenditures for conducting business in a new territory. The CFO for Peronto’s believes that the $25,000 start up expenditures should be recognized as an asset because they will benefit the company for many periods in the future. Your role as the staff accountant is to determine the correct recognition for the start up expenditures.
Your interpretation of the guidance: The correct recognition of the $25,000 start up expenditures will be:
- as an asset
- as an expense
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