2811422510

2811422510 - Chapter 3 Using Accrual Accounting to Measure...

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Chapter 3 Using Accrual Accounting to Measure Income Check Points (10 min.) CP 3-1 Millions Sales revenue……………………………………………. $ 781 Cost of goods sold……………………………………… (380) All other expenses……………………………………… (333 ) Net income………………………………………………. . $ 68 Beginning cash…………………………………………. . $ 112 Collections ($781 – $36)………………………………. . 745 Payments for: inventory………………………………. (391) everything else………………………. (308 ) Ending cash……………………………………………… $ 158 Chapter 3 Using Accrual Accounting to Measure Income 141
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(10 min.) CP 3-2 Statement Reports (Amounts in billions) Income statement Interest expense………………. $0.9 Balance sheet Long-term debt ($4.4 + $2.6 – $2.5)…………. $4.5 Interest payable………………. . 0.1 Financial Accounting 6/e Solutions Manual 142
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(10 min.) CP 3-3 Ford should record sales revenue when the revenue is earned by delivering automobiles to Enterprise. Ford should not record any revenue prior to delivery of the vehicles because Ford hasn’t earned the revenue yet. The revenue principle governs this decision. When Ford records the revenue from the sale, at that time — not before or after — Ford should also record cost of goods sold, the expense. The matching principle tells when to record expenses. Chapter 3 Using Accrual Accounting to Measure Income 143
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(10 min.) CP 3-4 a. April 30 Rent Expense ($3,000 × 1/6) ……. . 500 Prepaid Rent……………………. . 500 To record rent expense. Prepaid Rent Rent Expense Apr. 1 3,000 Apr. 30 500 Apr. 30 500 Bal. 2,500 Bal. 500 b. April 30 Supplies Expense ($700 – $500)…. 200 Supplies……………………………. 200 To record supplies expense. Supplies Supplies Expense Apr. 2 700 Apr. 30 200 Apr. 30 200 Bal. 500 Bal. 200 Financial Accounting 6/e Solutions Manual 144
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(10 min.) CP 3-5 Req. 1 (a) May 1 Computer Equipment…………….…. . 36,000 Cash…………………………………. . 36,000 Purchased computer equipment. (b) May 31 Depreciation Expense – Computer Equipment ($36,000 / 36). 1,000 Accumulated Depreciation – Computer Equipment……………. .. 1,000 Req. 2 Computer Equipment Accumulated Depreciation – Computer Equipment Depreciation Expense – Computer Equipment May 1 36,000 May 31 1,000 May 31 1,000 Bal. 36,000 Bal. 1,000 Bal. 1,000 Req. 3 Computer equipment…………………………………. $36,000 Less Accumulated depreciation……………………. (1,000 ) Book value……………………………………………… $35,000 Chapter 3 Using Accrual Accounting to Measure Income 145
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(continued) CP 3-5 Req. 4 Income statement: Depreciation expense – computer equipment… $ 1,000 Balance sheet: Computer equipment………………………………. $36,000 Less Accumulated depreciation…………………. (1,000) Financial Accounting 6/e Solutions Manual 146
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(10 min.) CP 3-6
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This note was uploaded on 04/07/2008 for the course ACCT 203 taught by Professor Fewox during the Spring '08 term at CofC.

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2811422510 - Chapter 3 Using Accrual Accounting to Measure...

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