Download ACCT550 Exercises Week 1 PDF

TitleACCT550 Exercises Week 1
TagsDepreciation Debits And Credits Expense Generally Accepted Accounting Principles (United States) Financial Accounting Standards Board
File Size333.6 KB
Total Pages6
Document Text Contents
Page 1

CA1-1 (FASB and Standard-Setting) Presented below are four statements which you are to

identify as true or false. If false, explain why the statement is false.

1. GAAP is the term used to indicate the whole body of FASB authoritative literature. True

2. Any company claiming compliance with GAAP must comply with most standards and

interpretations but does not have to follow the disclosure requirements. False Any company

claiming compliance with GAAP must comply with all standards and interpretations,

including disclosure requirements

3. The primary governmental body that has influence over the FASB is the SEC. True

4. The FASB has a government mandate and therefore does not have to follow due process in

issuing a standard. False In establishing financial accounting standards, the FASB relies on

two basic premises: 1) the FASB should be responsive to the needs and view-points of the

entire economic community, not just the public accounting profession, and 2) it should

operate in full view of the public through a “due process” system that gives interested

people ample opportunities to make their view know.



E2-7 (Assumptions, Principles, and Constraints) Presented below are a number of operational

guidelines and practices that have developed over time.

Instructions

Select the assumption, principle, or constraint that most appropriately justifies these procedures

and practices. (Do not use qualitative characteristics.)

(a) Fair value changes are not recognized in the accounting records. Historical cost principle

(b) Financial information is presented so that investors will not be misled. Full disclosure

principle

(c) Intangible assets are capitalized and amortized over periods benefited. Expense recognition

principle

(d) Repair tools are expensed when purchased. Materiality

(e) Agricultural companies use fair value for purposes of valuing crops. Industry practices or

fair value principle

(f) Each enterprise is kept as a unit distinct from its owner or owners. Economic entity

assumption

(g) All significant post balance sheet events are reported. Full disclosure principle

(h) Revenue is recorded at point of sale. Revenue recognition principle

(i) All important aspects of bond indentures are presented in financial statements. Full

disclosure principle.

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(j) Rationale for accrual accounting. Revenue and Expense Recognition principle

(k) The use of consolidated statements is justified. Economic entity assumption

(l) Reporting must be done at defined time intervals. Periodicity assumption

(m) An allowance for doubtful accounts is established. Expense recognition principle

(n) Goodwill is recorded only at time of purchase. Historical cost principle

(o) A company charges its sales commission costs to expense. Expense recognition principle



P3-1 (Transactions, Financial Statements—Service Company) Listed below are the

transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sept. 1 Kawabata begins practices as a dentist and invests $20,000 cash.

2 Purchase dental equipment on account from Green Jacket Co, for $17,280.

4 Pays rent for office space, $680 for the month.

4 Employs a receptionist, Michael Bradley.

5 Purchases dental supplies for cash, $942.

8 Receives cash of $1,690 from patients for services performed.

10 Pays miscellaneous office expenses, $430.

14 Bills patients $5,820 for services performed.

18 Pays Green Jacket Co. on account, $3,600.

19 Withdraws $3,000 cash from the business for personal use.

20 Receives $980 from patients on account.

25 Bills patients $2,110 for services performed

30 Pays the following expenses in cash:

Salaries and wages $1,800, miscellaneous office expenses $85

30 Dental supplies used during September, $330.



Instructions

(a) Enter the transactions shown above in appropriate general ledger accounts (use T-

accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment,

Accumulated Depreciation—Equipment, Accounts Payable, Owner’s Capital, Service Revenue,

Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation

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