Concept explainers
For each of the following situations write the principle, assumption, or concept that justifies or explains what occurred.
A. A landscaper received a customer’s order and cash prepayment to install sod at a house that would not be ready for installation until March of next year. The owner should record the revenue from the customer order in March of next year, not in December of this year.
B. A company divides its income statements into four quarters for the year.
C. Land is purchased for $205,000 cash; the land is reported on the
D. Brandy’s Flower Shop is
E. When preparing financials for a company, the owner makes sure that the expense transactions are kept separate from expenses of the other company that he owns.
F. A company records the expenses incurred to generate the revenues reported.
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Chapter 3 Solutions
Principles of Accounting Volume 1
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- During its first year of operations, Cooper Company bills credit customers $19,800 for services rendered. During the year, Cooper receives $16,500 from all customers, $3,700 of which is received from cash customers. Required: What amount of revenue should be shown on the income statement for the year?arrow_forwardFor each of the following independent items, indicate when revenue should be recognized.a. Interest on loans made by a financial institution, receivable in annual payments. Interest on loans made by a financial institution, receivable in three years when the customer, who has an excellent credit rating, will make payment. Recognition of revenue from the cash sale of airline tickets, when the travel purchased will occur in the next fiscal period. Transportation of freight by a trucking company for a customer; the customer is expected to make payment in accordance with the terms of the invoice in 60 days. Growing, harvesting, and marketing of Christmas trees; the production cycle is ten years. Building houses in a subdivision, when the project will take two years to complete and each house must be individually sold by the contractor. The contractor owns each house until title is transferred to the new owner. Building houses in a subdivision, when the…arrow_forwardUse the following information for Problems 30 and 31.On March 15, Calloway, Inc., paid property taxes of $480,000 for the calendar year.The journal entry at March 15 to record the payment of property taxes would include which of the following?a. A debit to Property Tax Expense of $480,000.b. A credit to Cash of $120,000.c. A debit to Prepaid Property Taxes of $360,000.d. A credit to Prepaid Property Taxes of $40,000.arrow_forward
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- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College