Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Textbook Question
Chapter 2, Problem 2.7E
Cash versus Accrual Bases of Accounting. Top Notch Services was founded on January 2 and offers computer consulting and other technology-related services. During its first quarter of operations, the following events occurred:
- a. In January, Top Notch provided and billed clients for $40,000 of consulting services. It was paid for these services in March.
- b. In January, Top Notch collected $25,000 from clients for services provided during the month.
- c. In February, Top Notch provided and billed clients for $45,000 of consulting services. It collected $12,000 in the current month and the remaining amount in March.
- d. In March, Top Notch collected $34,000 from clients for services provided during the month and billed clients for an additional $21,000 for services provided.
- e. Top Notch pays employees at the end of each month for service provided. Monthly payroll was $12,000, $13,000, and $15,000 in January, February, and March, respectively.
- f. Top Notch pays its utility bills at the end of each month. Utility bills totaled $800, $850, and $1,000 in January, February, and March, respectively.
- g. Top Notch hired an independent contractor who provided $1,200 of services in February. The contractor was paid in March.
Determine Top Notch’s net income for each month from January through March under both the cash and the accrual bases of accounting. Explain any difference in total net income under cash versus accrual accounting for the three months.
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You run a consulting firm. During Year 1, your firm collected $200,000 from clients (all of these payments were for work previously done). On January 1, Year 1, the Accounts Receivable account had a balance of $40,000. On December 31, Year 1, the Accounts Receivable account had a balance of $60,000. Based on this information, what amount should your firm recognize as revenue for Year 1?
Chapter 2 Solutions
Intermediate Accounting
Ch. 2 - Prob. 2.1QCh. 2 - Why is a conceptual framework of accounting...Ch. 2 - Prob. 2.3QCh. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - What is predictive value?Ch. 2 - Prob. 2.8QCh. 2 - When is financial information considered...Ch. 2 - Prob. 2.10Q
Ch. 2 - Prob. 2.11QCh. 2 - Prob. 2.12QCh. 2 - What is the recognition principle and when is an...Ch. 2 - What is the revenue recognition principle and when...Ch. 2 - Prob. 2.15QCh. 2 - When are expenses recognized under IFRS?Ch. 2 - How are transactions recorded under accrual...Ch. 2 - Prob. 2.18QCh. 2 - Prob. 2.19QCh. 2 - Prob. 2.20QCh. 2 - Prob. 2.21QCh. 2 - Prob. 2.22QCh. 2 - Prob. 2.23QCh. 2 - Prob. 2.1BECh. 2 - Prob. 2.2BECh. 2 - Objective of Financial Reporting. Explain the...Ch. 2 - Prob. 2.4BECh. 2 - Fundamental and Enhancing Characteristics....Ch. 2 - Prob. 2.6BECh. 2 - Prob. 2.7BECh. 2 - Prob. 2.8BECh. 2 - Fundamental and Enhancing Characteristics....Ch. 2 - Faithful Representation. Match the component of a...Ch. 2 - Prob. 2.11BECh. 2 - Prob. 2.12BECh. 2 - Expense Recognition. Discuss the three main...Ch. 2 - Element Definitions. Identify whether the...Ch. 2 - Prob. 2.15BECh. 2 - Element Definitions, U.S. GAAP, IFRS. Identify...Ch. 2 - Prob. 2.17BECh. 2 - Measurement Bases. Match the measurement basis...Ch. 2 - Cash versus Accrual Bases of Accounting. The...Ch. 2 - Prob. 2.20BECh. 2 - Prob. 2.21BECh. 2 - Assumptions in Financial Reporting. Indicate the...Ch. 2 - Conceptual Framework. Noeleen Auto Mall, Ltd....Ch. 2 - Qualitative Characteristics. Referring to the...Ch. 2 - Prob. 2.3ECh. 2 - Prob. 2.4ECh. 2 - Terms and Concepts. Complete the following...Ch. 2 - Prob. 2.6ECh. 2 - Cash versus Accrual Bases of Accounting. Top Notch...Ch. 2 - Cash vs. Accrual. you are provided the following...
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