Exercises learning team week 3

Exercises learning team week 3 - EXERCISES WEEK 3 1...

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Unformatted text preview: EXERCISES WEEK 3 1 Exercises Week 3 Luis D. Maym Romero University of Phoenix ACC/280 Prof. Manfredo H. Rodrguez 18:46:11 E 3-2 On numerous occasions, proposals have surfaced to put the federal government on the accrual basis of accounting. This is no small issue. If this basis were used, it would mean that billions in unrecorded liabilities would have to be booked, and the federal deficit would increase substantially. Instructions (a) What is the difference between accrual-basis accounting and cash-basis accounting? Accrual basis financial statements do a better job of matching revenues with expenses for a particular time period. The income includes sales for which you have done the work haven't yet been paid (your receivables) and the expenses include expenses incurred for the the period that you have not yet paid (payables). It gives a more accurate picture of the actually costs and revenues associated with the time period you are looking at because with cash basis it would be skewed by when the cash was received or paid out. Example: You could have done a lot of business in year one but if you don't receive the cash until year two it may look like year one was not successful as it really was. Cash basis is good for someone who doesn't carry a lot in receivables, like when payment is made at the time of the sale, or for a business that is very seasonal and for people who don't need much out of their financial statements other than to have them for tax purposes. (b) Why would politicians prefer the cash basis over the accrual basis? (c) Write a letter to your senator explaining why the federal government should adopt the accrual basis of accounting. P 3-2A Neosho River Resort, Inc. opened for business on June 1 with eight air-conditioned units. Its trial balance before adjustment on August 31 is as follows. NEOSHO RIVER RESORT, INC. Trial Balance 31-Aug-08 Account Number Debit Credit 101 Cash $ 19,600.00 126 Supplies $ 3,300.00 130 Prepaid Insurance $ 6,000.00 140 Land $ 25,000.00 143 Cottages $ 125,000.00 149 Furniture $ 26,000.00 201 Accounts Payable $ 6,500.00 208 Unearned Rent $ 7,400.00 275 Mortgage Payable $ 80,000.00 311 Common Stock $ 100,000.00 332 Dividends $ 5,000.00 429 Rent Revenue $ 80,000.00 622 Repair Expense $ 3,600.00 726 Salaries Expense $ 51,000.00 732 Utilities Expense $ 9,400.00 $ 273,900.00 $ 273,900.00 In addition to those accounts listed on the trial balance, the chart of accounts for Neosho River Resort also contains the following accounts and account numbers: No. 112 Accounts Receivable, No. 144 Accumulated DepreciationCottages, No. 150 Accumulated DepreciationFurniture, No. 212 Salaries Payable,No. 230 Interest Payable,No. 320 Retained Earnings,No. 620 Depreciation ExpenseCottages, No. 621 Depreciation ExpenseFurniture, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense....
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Exercises learning team week 3 - EXERCISES WEEK 3 1...

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