2 on may 2 jjs purchased a riding lawn mower for 2500

Info icon This preview shows pages 17–20. Sign up to view the full content.

2. On May 2, JJ’s purchased a riding lawn mower for $2,500 cash. 3. On May 8, JJ’s purchased a $15,000 truck. JJ’s paid $2,000 down in cash and issued a note payable for the remaining $13,000. 4. On May 11, JJ’s purchased some repair parts (expense) for $300 on account. 5. On May 18, JJ provided lawn care services for $150 on account. 6. On May 25, JJ collected $75 of it‘s customer’s accounts receivable. 7. On May 28, JJ’s pays $150 of its accounts payable. 8. On May 29, JJ’s recorded lawn care services provided during May of $750. All clients paid in cash. 9. On May 31, JJ’s purchased gasoline for the lawn mower and the truck for $50 cash.
Image of page 17

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Chapter 5: The Income Statement Describe the purpose of net income on an income statement. The accountant’s attempt to summarize in one number the overall economic performance of a company for a given period. Prepare a simplified income statement. Prepare a simplified Income Statement based on the follow information: Sales 220,000 COGS 88,000 Interest income 5,000 Interest expense 9,000 Operating expenses 72,000 I ncome taxes 15,000 The Income statement would look like this: Sales 220,000 COGS (88,000) Gross Profit 132,000 Operating expenses (72,000) Operating income 60,000 Interest income 5,000 Interest expense (9,000) Income before taxes Income taxes (15,000) Net income 41,000 Explain when revenues and expenses are recognized for a particular situation. Revenue recognition and cost/expense matching are the core of accrual accounting. They insure that only and all revenue that has been earned in a given period is reported on the Income Statement and that all costs and expenses incurred to generate that revenue is include on the income statement for the same period. Firms can only recognize revenues when they have delivered the goods and services to the customer and are reasonably assured that they will be paid. They do not have to receive the cash to recognize revenue if they are reasonably certain that they will be paid in the future. They also cannot recognize revenue just because they have received 15
Image of page 18
the cash. If they receive the cash prior to delivering the goods and services, they must wait until they do deliver them before recognizing revenues. Because firms usually don’t sell to customers that they don’t think will pay for the goods or services, revenue is usually recognize when the goods and services are delivered, i.e. at point of sale. Once the timing of revenue recognition has been determined, the firm matches all the costs/expenses they incurred generating that revenue to the revenue in the same period. “Incurred” means that they received the benefit of the cost/expense in the period same period. That is, the cost/expense help generate the revenue in that period. Payment is not a consideration, only when they gained the benefit or contribution to revenue. Thus, expenses can be recognized in one period and paid for in the next.
Image of page 19

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 20
This is the end of the preview. Sign up to access the rest of the document.
  • Spring '16
  • Kenneth Cassell
  • Balance Sheet, Generally Accepted Accounting Principles

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern