The revenue recognition principle The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company. Installment sales method: Under the installment sales, the revenue and costs are recognized only when the payment of cash is received from customer. Two composed components are involved in the each payment of cash. Components of sales are as follows: Partial recovery of the cost from sales Component of gross profit These components are determined by the percentage of gross profit which is applicable to sales. Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions: Debit , all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities. Credit , all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses. To prepare: The necessary journal entries of Company S to record the sale, receipt of the down payment, and the default and repossession applying the installment sales method.

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What amount of office expenses is allocated to Department Y on these general accounting question?

Answer 1

Question

Chapter 5, Problem 5.28E

To determine

The revenue recognition principle

The revenue recognition principle refers to the revenue that should be recognized in the time period, when the performance obligation (sales or services) is completed by the company.

Installment sales method:

Under the installment sales, the revenue and costs are recognized only when the payment of cash is received from customer. Two composed components are involved in the each payment of cash. Components of sales are as follows:

Partial recovery of the cost from sales

Component of gross profit

These components are determined by the percentage of gross profit which is applicable to sales.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.

Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

To prepare: The necessary journal entries of Company S to record the sale, receipt of the down payment, and the default and repossession applying the installment sales method.

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What amount of office expenses is allocated to Department Y on these general accounting question?

MCQ

A business purchased equipment for $165,000 on January 1, 2021. The equipment will be depreciated over the five years of its estimated useful life using the straight-line depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on the equipment for the year 2021? (Assume the residual value of the acquired equipment to be zero.) A) Debit $165,000 to Equipment, and credit $145,000 to Cash. B) Debit $33,000 to Depreciation Expense-Equipment, and credit $33,000 to Accumulated Depreciation-Equipment. C) Debit $165,000 to Depreciation Expense-Equipment, and credit $145,000 to Accumulated Depreciation-Equipment. D) Debit $33,000 to Depreciation Expense, and credit $33,000 to Equipment.