Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Chapter 1, Problem 1.10MCP
To determine

Concept Introduction:Balance sheet is the statement which makes a record of all assets and liabilities on a particular date. Balance sheet shows value of assets and liabilities on closing date of year.

To Prepare: Correct balance sheet and correct income statement.

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Joey Juno began a web-based computer sales and service company on June 1, 20X8, called Juno's Toys. Joey has made a few decisions regarding the accounting system; all prepayments and unearned revenues will be recorded as assets and liabilities and the company will use a periodic inventory system. Juno's Toys completed these transactions during November of the current year: Joey invested $12,000 cash along with $9,000 of used computer equipment into his new business. Purchased 8 months of insurance for $1,200 cash; the insurance is effective immediately. Hired a computer technician, named Barney to be paid every two weeks. $23,000 of merchandise was purchased from Eastman Store on account terms 1/10, n30. Freight was paid in amount of $200 for above purchase. Bought $400 of office supplies on account. Sold merchandise to John Smith that cost $3,300 for $3,800. Mr. Smith paid $500 cash and put the rest on account, with term 1/15, n30. Bought office furniture for $9,000. Paid $1,000 cash…
Retain Required: Briefly explain whether the $7,000 and the $180,000 receipts constitutes ordinary income Alan works for a large investment bank called "Big Bank". He also regularly gives a 5 minute update on the day's events in financial markets on a late night TV show. Although the TV show does not pay him for this, Big Bank does give him $150 per appearance, as they believe that his appearance brings positive publicity to Big Bank. Alan earned $7000 from this activity in the past financial year. Recently, Big Bank has been experiencing tough economic conditions, and wishes to save some money. Subsequently, Big Bank gave Alan $180,000 (paid over two $90,000 instalments) in exchange for Alan agreeing to no longer receive annual bonuses that he had been entitled to in his contract. Alan had received bonuses of $50,000 - $100,000 per year for the last 5 years.
Suppose you work for a company that sells computers and that you have been asked to oversee doing a physical count and valuation of the inventory at year end. You determine the value of inventory on hand to be $23,500 yet according to the Inventory account in the ledger the balance should be $35,000. give two reasons that could explain why the balances are not the same and what journal entry would need to be recorded in the books?

Chapter 1 Solutions

Financial Accounting: The Impact on Decision Makers

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