Applying accounting assumptions and principles Michael McNamee is the proprietor of a property management company, Apartment Exchange, near the campus of Pensacola State College. The business has cash of $8,000 and furniture that cost $9,000 and has a market value of $13,000. The business debts include accounts payable of $6,000. Michael’s personal home is valued at $400,000, and his personal bank account has a balance of $1,200. Consider the accounting principles and assumptions discussed in the chapter, and identify the principle or assumption that best matches the situation: a. Michael’s personal assets are not recorded on the Apartment Exchange’s balance sheet. b. The Apartment Exchange records furniture at its cost of $9,000, not its market value of $13,000. c. The Apartment Exchange reports its financial statements in U.S. dollars. d. Michael expects the Apartment Exchange to remain in operation for the foreseeable future.

After researching the different forms of business organization, Natalie Koebel decides to operate “Cookie Creations” as a corporation. She then starts the process of getting the business running. In November 2022, the following activities take place.   Nov.  8      Natalie cashes her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account.           8      She opens a bank account under the name “Cookie Creations” and transfers $500 from her personal account to the new account in exchange for common stock.         11      Natalie pays $65 to have advertising brochures and posters printed. She plans to distribute these as opportunities arise. (Hint: Use Advertising Expense.)         13      She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $125 cash.         14      Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an excellent top-of-the-line food processor and mixer…

Helen Hernandez, president of Double H Enterprises, applied for a $175,000 loan from Great Nations Bank. The bank requested financial statements as a basis for granting the loan. Helen instructed her accountant to provide the bank with a balance sheet, but to omit the other financial statements because her business incurred a net loss last year.   Helen contends that as the owner of the business, it is her right to withhold certain financial statements from the bank.  Do you agree with Helen? Why or why not?  What type of information would banks require from a loan applicant and why would the loan officer request this information?

You have recently been hired by Davis & Company, a small public accounting firm. One of the firm’s partners, Alice Davis, has asked you to deal with a disgruntled client, Mr. Sean Pitt, owner of the city’s largest hardware store. Mr. Pitt is applying to a local bank for a substantial loan to remodel his store. The bank requires accrual based financial statements but Mr. Pitt has always kept the company’s records on a cash basis. He does not see the purpose of accrual based statements. His most recent outburst went something like this: “After all, I collect cash from customers, pay my bills in cash, and I am going to pay the bank loan with cash. And, I already show my building and equipment as assets and depreciate them. I just don’t understand the problem.Mr. Pitt has relented and agrees to provide you with the information necessary to convert his cash basis financial statements to accrual basis statements. He provides you with the following transaction information for the fiscal…