ACCOUTING PRIN SET LL INCLUSIVE
ACCOUTING PRIN SET LL INCLUSIVE
14th Edition
ISBN: 9781119815327
Author: Weygandt
Publisher: WILEY
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Chapter 3, Problem 6Q
To determine

Historical Cost Principle: The historical cost concept of accounting (cost principle) states that each and every item should be recorded at its cost (purchased value), not at its fair value while preparing any financial statement because there is no availability of document regarding fair value as evidence for recording, till that item is not sold in the market.

Adjustment Entries: Adjusting entries are those entries which are made at the end of the year to update all the balances in the financial statements to show the true financial information and to maintain the records according to accrual basis principle.

To explain: Historical cost concept requires adjusting entries or not.

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Let's say that Dr. Tim’s Company purchased a heavy-duty truck on July 1, 2021, for $30,000. It was estimated that it would have a useful life of 10 years and then would have a trade-in value of $6,000. The company uses the straight-line method. It was traded on August 1, 2026, for a similar truck costing $42,000; $16,000 was allowed as trade-in value (also fair value) on the old truck and $26,000 was paid in cash. A comparison of expected cash flows for the trucks includes the exchange lacks commercial substance. What is the entry to record the trade-in? Truck (new)                                                                               $42,000 Accumulated Depreciation                                                    $12,200 ($30,000 - $6,000) x (61 months / 120 months) Loss on Disposal of Trucks                                                     $1,800 ($30,000 - $12,200 - $16,000 [trade-in]           Trucks (old)…
16. Candy Company projects the following sales: BB (Click on the icon to view the projected sales.) Candy collects sales on account in the month after the sale. The Accounts Receivable balance on January 1 is $12,300, which represents December's sales on account. Candy projects the following cash receipts from customers: BEE (Click on the icon to view the cash receipts from customers.) Recalculate cash receipts from customers if total sales remain the same but cash sales are only 5% of the total. Begin by computing the cash sales and sales on account for each month if cash sales are only 5% of the total. January February March Cash sales (5%) Sales on account (95%) Total sales $ 31,000 $ 27,000 $ 33,000 Data table X I Data table - X January February March January February March Cash sales (10%) $ 3,100 $ 27,900 Sales on account (90%) 2,700 $ 24,300 3,300 29,700 Cash receipts from cash sales Cash receipts from sales on account $ 3,100 $ 2,700 $ 12,300 27,900 3,300 24,300 $ 31,000 $…
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