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Chapter 04 Homework 2 - Professor Gordon ACCT151 18...

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Professor Gordon ACCT151 18 September 2008 Chapter 4 Homework 2 E27,E23,P11,P6,D5 E27) Year 1 Year 2 Year 3 Sales $366,000 $90,000 $90,000 Equipment $100,000 Salaries and Wages $50,000 $50,000 $50,000 Advertising $5,000 $5,000 $5,000 Rent and utilities $36,000 $36,000 $36,000 Net income The revenue recognition principle applies because it is recognizing the revenue even though no services have technically been given yet (it is a three year membership, services will be on-going for that time but revenue is recognized way before that.) I believe that the accrual basis are more useful to management and investors because they need to know what money is incoming and the business already has this money even though it will be used over a three year period of time. E23) 4 Expense Accounts 5,343,949 | 8,111,224 427,654 | 42,758 | 2,296,863 | 8,111,224 2 Revenue Accounts 8,799,223 | 238,525 | 8,560,698 8,799,223 Income Summary 8,111,224 | 8,799,223 687,999 | 687,999 Dividends 110,158 | 110,158 Retained Earnings 110,158 | 687,999
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577,84 P11) 23,000 first year, 46,000 second … 2000 first year, 1500 second, first year salaries: 15,000 second year 24 for second Rent 5,000 each year Income Statement Darby’s Delivery Service Year 1 Sales $23,000 Advertising expense $2,000
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