1) Introduction: Journal Entries • Journal entries are the first step in recording financial transactions and preparation of financial statements. • These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits. • Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited / credited to reflect the effect of business transactions and events. To Determine: Journal entries to record the April purchases of Trading Securities.

Question

A parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. What is the effect of the sale on the accounting equation for the seller? A) Assets increase by $52,000; owner's equity increases by $52,000. B) Assets increase by $85,000; owner's equity increases by $85,000. C) Assets increase by $137,000; owner's equity increases by $137,000. D) Assets increase by $140,000; owner's equity increases by $140,000. E) None of the above.

Answer 1

Question

Chapter 15, Problem 15SP

To determine

1)

Introduction:

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited / credited to reflect the effect of business transactions and events.
To Determine:

Journal entries to record the April purchases of Trading Securities.

To determine

2)

Introduction:

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited / credited to reflect the effect of business transactions and events.
Principle of Revenue Recognition

• It assists in determination of the correct revenue to be recognized and reported for a particular period. This ensures that the quality and accuracy of Financial Statements is maintained.
• In case there is a change in the fair value of assets, the same must be revalued and the difference in revaluation must be charged to the income statement for the current reporting period. The carrying amount of the assets will be revised accordingly.

Adjusting Entries:

• The journal entries passed at the beginning or end of a financial period in order to record the adjustments to carrying amounts and values of components of financial statements are called adjusting entries.

• Examples include change in carrying amounts recorded to capture impact of foreseeable loss in future due to devaluation , losses recorded owing to loss of assets due to reasons such as natural causes etc.

To Determine:

Journal entries to record change in fair value of purchases of Trading Securities.

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A parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. What is the effect of the sale on the accounting equation for the seller? A) Assets increase by $52,000; owner's equity increases by $52,000. B) Assets increase by $85,000; owner's equity increases by $85,000. C) Assets increase by $137,000; owner's equity increases by $137,000. D) Assets increase by $140,000; owner's equity increases by $140,000. E) None of the above.

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