Concept Introduction:
Revenue recognition principle- It states that revenue should be recognized and reported in financial statementswhen services or products are provided to the customers and not the payment is received. In other words, entity should not report income when they receive cash from their customers to record revenue from sales. This principle is consistent with accrual basis of accounting.
Requirement 1:
To determine the principle if Quagmire company recognizes revenue when goods are delivered to a customer, even though cash will not be collected from customer for 30 days.
Concept Introduction:
Conservatism principle- This principle states that the accountant should always be conservative in recording all uncertain or estimated revenue and always record and report all uncertain expense or loss.
Requirement 2:
To determine the principle when inventory, which was damaged by flood, is reported at the lower of its cost or market value.
Concept Introduction:
Historical cost- It states that the resources reported in financial statements should be recorded at initial acquisition cost that is the exchange price at the time the resource is acquired.
Requirement 3:
To determine the principle when land, located in a desirable location, is reported at original acquisition price, even though its value has increased by over 100% since it was purchased.
Concept Introduction:
Expense recognition principle- It states that all expenses in a business should be recognized and reported in the same time-period as the revenue the business generates. It can be the same time when the cash is paid, or it might predate or follow with the revenue amount realized. This is commonly referred as matching principle.
Requirement 4:
To determine the principle when the cost paid for a delivery truck is recorded as an asset and expensed over the next 5 years as it is used to help generate revenue.
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Chapter 2 Solutions
Cornerstones of Financial Accounting
- 11:/13 Problem 2-2U S) William Company operates a customer loyalty program. T entity grants loyalty points for goods purchased. The loyalty points can be used by the customers in exchane for goods of the entity. The pointa have no expiry date. During 2020, the entity issued 100,000 award credits and expects that 80% of these award credits shall be redeemed The total stand-alone selling price of the award credita granted is reliably measured at P2,000,000. In 2020, the entity sold goods to customers for a total consideration of P8,000,000 based on stand-alone selling price. The award credits redeemed and the total award credits expected to be redeemed each year are as follows: Redeemed Expected to be redeemed 2020 2021 30,000 15,000 80% 90% 1. What is the revenue from points for 2020? 1,600,000 b. a. 1.500,000 600,000 d. 480,000 2. What is the revenue from points for 2021? a. 240,000 b. 200,000 120,000 04.29arrow_forwardPlease be quick, I have corrected the income statement as requestedarrow_forwardState the accounting assumption, principle, qualitative characteristic, or constraint that is most applicable in the following cases. В. 1. All payments less than RM25 are expensed as incurred. 2. The company employs the same inventory valuation method from period to period. 3. A patent is capitalized and amortized over the periods benefited. 4. Assuming that dollars today will buy as much as ten years ago. 5. Rent paid in advance is recorded as prepaid rent. 6. Financial statements are prepared each year. 7. All significant post-statement of financial position events are reported. 8. Personal transactions of the proprietor are distinguished from business transactions. B.arrow_forward
- In a restated set of financial statements prepared in accordance with the current cost accounting, how much would appear as Realized Holding Gain? Note: Realized holding gain (realized through sale) is an increase in fair value of an asset while held.arrow_forwardPlease do not give solution in image format thankuarrow_forwardSir please help me sir urgently pleasearrow_forward
- Part One DaYs Sales Outstanding Data: 2018: 26.05 2019: 32.25 2020: 29.69 2021:36.43 2022: 35.05 Based on your analysis from Part One, which of the following transactions and events would result in an improvement in Days Sales Outstanding in year 2022? A) recognising the impairment of plant & equipment B) the recognition of income tax expense owing at the end of the period C) recognising the increase in market value of land D) A and B only E) A and C only F) B and C only G) All of the above H) None of the abovearrow_forwardQuestion 8 The Sleazy Corporation prepared the following statement of income and comparative statements of financial position for 2023. SLEAZY CORPORATION Income Statement For the Year Ended 31 January 2023 Sales Less: Cost of Goods Sold Gross Profit Less: Depreciation expense Other operating expenses Plus: Gain on Sale of Equipment Income Before Taxes Income Taxes Net Income SLEAZY CORPORATION Statement of Financial Position At January 31 Assets Cash Accounts Receivable Temporary Investments Merchandise Inventory Property, Plant, and Equipment Less: Accumulated Depreciation Total Assets Liabilities and Shareholders' Equity Accounts Payable Other Accrued Payables Bonds Payable Common Shares Retained Earnings Total Liabilities & Shareholders' Equity $840,000 385,000 455,000 68,600 85,400 49,000 350,000 70,000 $280,000 ======= 2023 $ 14,000 89,600 35,000 336,000 350,000 (75,600) $749,000 ======== $ 70,000 49,000 140,000 210,000 280,000 $749,000 ======== 2022 $ 12,600 77,000 35,000…arrow_forwardReturn on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions. The percent that a company adds to its cost of sales to determine the selling price is called a markup. That is Hershey’s markup percent? Round to one decimal place.arrow_forward
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