Accrual basis of accounting: In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged. Cash basis of accounting: Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made. To calculate: The net earnings for the Company G under the cash basis of accounting.

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Answer 1

Question

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

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For the year ended December 31, 2019, Settles Inc. earned an ROI of 9.9%. Sales for the year were $17 million, and the average asset turnover was 3.3. Average stockholders' equity was $2.3 million. Required: a. Calculate Settles Inc.'s margin and net income. b. Calculate Settles Inc.'s return on equity.

Answer 2

Question

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

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Answer 3

Question

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

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Answer 4

Question

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

Expert Solution & Answer

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Answer 5

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

Answer 6

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

Answer 7

Chapter 4, Problem 4.5E

(a)

To determine

Accrual basis of accounting:

In accrual basis of accounting, the company records all the transaction that brings changes in the financial statement of the company. In accrual basis of accounting, the revenue is recognized for the accounting period, in which the goods are sold, or the service performed even if cash is not exchanged. Similarly, the expenses are recognized for the accounting period in which the business incurred expenses, even if cash is not exchanged.

Cash basis of accounting:

Cash basis of accounting contradicts the accrual basis of accounting. In the cash basis of accounting, the business recognizes the revenues, only when they receive cash. Similarly, the business recognizes expenses, only when payments are made.

To calculate: The net earnings for the Company G under the cash basis of accounting.

Answer 8

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

Answer 9

(b)

To determine

To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 4 - Prob. 1Q Ch. 4 - Identify and stale two generally accepted...Ch. 4 - Prob. 3Q Ch. 4 - Prob. 4Q Ch. 4 - Prob. 5Q Ch. 4 - Why may the financial information in an unadjusted...Ch. 4 - Distinguish between the two categories of...Ch. 4 - What types of accounts does a company debit and...Ch. 4 - Prob. 9Q Ch. 4 - Prob. 10Q

Solution Summary: The author explains the difference between cash and accrual basis of accounting, which provides more useful information to the decision makers.

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To identify: Which basis of accounting (either cash or accrual) provides more useful information to the decision makers.

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