(a)
To prepare: T-accounts for mentioned items.
Introduction: The financial statements of a company include the
(b)
To post: The transactions to the T-account.
Introduction: The financial statements of a company include the balance sheet, income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company.
(3)
To prepare: The
Introduction: The financial statements of a company include the balance sheet, income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company.
(4)
To compute: The net income and state the feasibility to operate.
Introduction: The financial statements of a company include the balance sheet, income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company.
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HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
- Blue Company, an architectural firm, has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2019), the company hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. The total cash receipts are summarized as follows. The accounts receivable from customers at the end of the year are 120,000. You note that the accounts receivable at the beginning of the year were 190,000. The cash sales included 30,000 of prepayments for services to be provided over the period January 1, 2019, through December 31, 2021. a. Compute the companys accrual basis gross income for 2019. b. Would you recommend that Blue use the cash method or the accrual method? Why? c. The company does not maintain an allowance for uncollectible accounts. Would you recommend that such an allowance be established for tax purposes? Explain.arrow_forwardYour client is preparing financial statements to show the bank. You know that he has incurred a refrigeration repair expense during the month, but you see no such expense on the books. When you question the client, he tells you that he has not yet paid the 1,255 bill. Your client is on the accrual basis of accounting. He does not want the refrigeration repair expense on the books as of the end of the month because he wants his profits to look good for the bank. Is your client behaving ethically by suggesting that the refrigeration repair expense not be booked until the 1,255 is paid? Are you behaving ethically if you agree to the clients request? What principle is involved here?arrow_forwardS. Waweru starts business on 1st July 2020, when he deposits Shs. 18,000 into his business bank account and Shs. 2,500 in his cash account. During the month of July, he undertakes the following transactions:- 2020 July 3 He purchases shop fittings for sh. 2,500 and pays by cheque. July 4 He buys a motor vehicle from AB & Co. on credit Sh. 3,000. July 6 He buys stock for Sh. 1,500 and pays through bank. July 8 He sells goods for cash Sh.1,000. July 10 Buys goods on credit from XY & Co. for Sh. 1,200 July 12 Sells goods to A. Smith for Sh. 900 on credit July 13 Pays wages Sh. 120 by cash July 14 A. Smith returns goods worth Sh. 200 July 15 Pays to AB & Co. Sh. 3,000 by cheque July 17 Goods returned to XY & Co. amounting to Sh. 350 July 21 Receives from A. Smith a cheque for Sh. 700 July 25 Sells goods for cash Sh. 300. July 30…arrow_forward
- S. Waweru starts business on 1st July 2020, when he deposits Shs. 18,000 into his business bank account and Shs. 2,500 in his cash account. During the month of July, he undertakes the following transactions:- 2020 July 3 He purchases shop fittings for sh. 2,500 and pays by cheque. July 4 He buys a motor vehicle from AB & Co. on credit Sh. 3,000. July 6 He buys stock for Sh. 1,500 and pays through bank. July 8 He sells goods for cash Sh.1,000. July 10 Buys goods on credit from XY & Co. for Sh. 1,200 July 12 Sells goods to A. Smith for Sh. 900 on credit July 13 Pays wages Sh. 120 by cash July 14 A. Smith returns goods worth Sh. 200 July 15 Pays to AB & Co. Sh. 3,000 by cheque July 17 Goods returned to XY & Co. amounting to Sh. 350 July 21 Receives from A. Smith a cheque for Sh. 700 July 25 Sells goods for cash Sh. 300. July 30…arrow_forwardSeashore Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. On December 31, Seashore Home has collected $500 from cash-paying customers. Seashore Home’s remaining customers owe the business $1,900. How do I solve his problem?arrow_forwardYou habe a business where you babysit for people in your local area.Some of your customers pay you mimmediately after you finish a job.Some customers ask you to send them a bill.It is now the 30th June and you have collected $3,600 from cash-paying customers.Your remaining customers owe you $5,200. How much service revenue would you have under accrual accounting?arrow_forward
- Donato Menorca was a service advisor in a car dealership. He supervised a team of mechanics that keeps and restores the customers’ cars to good operating condition. Tired of being an employee, he decided to put up Express Repair Shop. During the month of January 2020, Menorca completed the following transactions: Started his business by transferring Php 90,000 of his personal money to the business bank account; Paid rent for the month, Php 12,000; Purchased several equipment for Php 40,000; made a down payment of Php 20,000 and arranged to pay the balance the following month; Bought supplies for cash amounting to Php 6,000; Performed services amounting to Php 70,000 of which Php 40,000 was received in cash; Paid the following cash expenses: wages, Php 20,000; utilities, Php 6,000. REQUIRED: Use the following accounts: Cash; Accounts Receivable; Supplies; Equipment; Accounts Payable; D. Menorca, Capital; Service Revenue; Wages Expense; Rent Expense; Utilities Expense Record the…arrow_forwardOn the last day of the fiscal year, a co-worker asks you to cut a check for $2,000 as a miscellaneous expense for supplies in order to completea project for a VIP customer today. You notice the invoice looks a little different from other invoices that are usually processed. You know that by preparing the closing entries tomorrow, the miscellaneous expense will be set to zero for the beginning of the year. Should you write this check today and record the expense or write the check tomorrow? How would the company be affected if the check is written and the invoice ends up being erroneous?arrow_forwardYou are in charge of the checking account for a small business. One morning, your accounting supervisor enters your office and asks you for a check for $150 for expenses that he tells you he incurred entertaining a client last night. He submits receipts from a restaurant and lounge. Later, your supervisor’s girlfriend stops by to pick him up for lunch, and you overhear her telling the receptionist what a great time she had at dinner and dancing with your supervisor the night before. What would you do and why?arrow_forward
- Paul has extended $3,500 credit to one of his largest clients for the purchase of two fireproof filing cabinets. Paul paid $1,250 each for the filing cabinets. Since he has not extended credit in the past, he is uncertain how to record the transaction on the balance sheet and income statement. He is using the accrual method of accounting. What are the entries Paul will need to make on his financial statements? A. Record $2,500 in sales; increase accounts receivable by $3,500; and record $1,000 in profit to balance the transactions. B. When the client pays Paul, he should record $3,500 in sales, $2,500 in COGS, and $1,000 in profit. C. Record $3,500 in sales; create an accounts receivable account and add $3,500 to it; decrease inventory by $2,500; increase COGS by $2,500. D. Record $3,500 in sales; create an accounts receivable account and add $3,500 to it; decrease inventory by $3,500; increase COGS by $3,500.arrow_forwardAssume you are the accounting manager for Logan’s Landscaping & Design. On December 1, 2013, Logan Karver, the owner, presents you with a check for $15,000 from a customer, Anna DeJuliet, to do a landscape design at her residence as soon as the ground thaws in the spring of 2014. No work on this project can be done until then. Logan wants you to deposit the check and include the $15,000 in the 2013 income statement. He is expecting to include the $15,000 in his 2013 net income in order to secure a loan from the bank in January 2014 for some new equipment. Explain how this check should be accounted for and why. (short answer)arrow_forwardPrepare journal entries for the following transactions. Make sure to observe the proper format of journal entries. Use EXCEL in presenting your answers. Mr. Panatag opened the Panatag Security Services. The following financial transactions and other arrangements took place from July 01 to August, 2019: July 01 Mr. Panatag invested his savings in the business amounting to P895,000, and his old car with market value of P545,000. July 02 Mr. Panatag signed a lease contract to be used as the office of his business. In accordance with the lease contract, Mr. Panatag paid the advance rental for three months amounting to P60,000. July 03 The owner purchased furniture amounting to P50,00. Paid 70% cash and the balance will be paid after 30 days. July 04 Mr. Panatag conducted interviews of security guards, and hired 10 security guards with a monthly salary of P13,000 per month. July 05 The owner secured a loan from the bank amounting to P250,000 payable over the…arrow_forward
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