Solution_Chpt03_partb - Chapter 3 (contd.) E32. Req. 1 Cash...

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Unformatted text preview: Chapter 3 (contd.) E32. Req. 1 Cash Basis Income Statement Accrual Basis Income Statement Revenues: Cash sales Customer deposits $340,000 21,000 Revenues: Sales to customers $410,000 Expenses: Inventory purchases Wages paid Utilities paid 90,000 54,200 7,200 Expenses: Cost of sales Wages expense Utilities expense 287,000 59,000 7,880 Net Income $209,600 Net Income $56,120 Req. 2 Accrual basis financial statements provide more useful information to external users. Financial statements created under cash basis accounting normally postpone (e.g., $70,000 credit sales) or accelerate (e.g., $21,000 customer deposits) recognition of revenues and expenses long before or after goods and services are produced and delivered (until cash is received or paid). They also do not necessarily reflect all assets or liabilities of a company on a particular date. E38. Req. 1 a. Cash (+A).....................................................................2,500,000 Short-term note payable (+L)............................ 2,500,000 Debits equal credits. Assets and liabilities increase by the same amount. b. Equipment (+A)............................................................ 90,000 Cash (- A)........................................................... 90,000 Debits equal credits. Assets increase and decrease by the same amount. c. Merchandise inventory (+A)......................................... 40,000 Accounts payable (+L)...................................... 40,000 Debits equal credits. Assets and liabilities increase by the same amount. d. Repair and maintenance expense (+E, - SE)............... 62,000 Cash (- A)........................................................... 62,000 Debits equal credits. Expenses decrease retained earnings (part of stockholders' equity). Stockholders' equity and assets decrease by the same amount. 1 e. Cash (+A)..................................................................... 372,000 Unearned pass revenue (+L)............................ 372,000 Debits equal credits. Since the season passes are sold before Vail Resorts provides service, revenue is deferred until it is earned. Assets and liabilities increase by the same amount. f. Cash (+A)..................................................................... 270,000 Lift revenue (+R, +SE)...................................... 270,000 Debits equal credits. Revenue increases retained earnings (a part of stockholders' equity). Stockholders' equity and assets increase by the same amount. g. Two transactions occur: (1) Accounts receivable (+A)....................................... 750 Ski shop sales revenue (+R, +SE).................... 750 Debits equal credits. Revenue increases retained earnings (a part of stockholders' equity). Stockholders' equity and assets increase by the same amount....
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This note was uploaded on 02/10/2012 for the course ACCT 2301 taught by Professor Li during the Fall '09 term at University of Central Florida.

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Solution_Chpt03_partb - Chapter 3 (contd.) E32. Req. 1 Cash...

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