Accrual basis accounting: According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not. Cash basis accounting: According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment. To Determine: The net income applying the accrual accounting model.

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Answer 1

Question

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

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The industrial enterprise "HUANG S.A." purchased a sorting and packaging machine from a foreign company on 1/4/2017 at a cost of €500,000. The useful life of the machine was estimated by the Management at ten (10) years, while the residual value was estimated at zero. For the transportation of the machine from abroad to the company's factory, the amount of €20,000 was paid on 15/4/2017. As the insurance coverage of the machine during transportation was the responsibility of the selling company, HUANG S.A. proceeded to insure the machine from 16/4/2017 to 15/4/2018, paying the amount of €1,200. The delivery took place on 15/4/2017. As adequate ventilation of the multifunction device is essential for its proper operation, the company fitted an air duct on the multifunction device. The cost of the air duct amounted to €2,000 and was paid on 20/4/2017. On 25/4/2017, an external electrician was paid €5,000 for the electrical connection of the device. The company also paid €5,000 to an…

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Answer 2

Question

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

Expert Solution & Answer

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Answer 3

Question

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

Answer 6

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

Answer 7

Chapter 2, Problem 2.2BYP

1.

To determine

Accrual basis accounting:

According to this basis of accounting, revenue should be recognized at the time when it is earned, irrespective of whether the cash received or not, and expense should be recognized at the time when it is incurred, irrespective of whether it is paid or not.

Cash basis accounting:

According to this basis of accounting, revenue should be recognized at the time of receiving in the form of cash and expense should be recognized at the time of payment.

To Determine: The net income applying the accrual accounting model.

Answer 8

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

Answer 9

2.

To determine

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 2 - Explain the difference between external events and...Ch. 2 - Each economic event or transaction will have a...Ch. 2 - What is the purpose of a journal? What is the...Ch. 2 - Explain the difference between permanent accounts...Ch. 2 - Describe how debits and credits affect assets,...Ch. 2 - Describe how debits and credits affect temporary...Ch. 2 - What is the first step in the accounting...Ch. 2 - Prob. 2.8Q Ch. 2 - Prob. 2.9Q Ch. 2 - Prob. 2.10Q

Solution Summary: The author explains how to determine the accrual basis net income using the cash basis accounting model.

To Explain: The effect on Mr. P’s balance sheet of converting from cash to accrual.

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Chapter 2 Solutions