Professional Documents
Culture Documents
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 viewpoints 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 known.
(e) Agricultural companies use fair value for purposes of valuing crops.
Ans: Measurement (fair value) principle
(f) Each enterprise is kept as a unit distinct from its owner or owners.
Ans: Economic entity assumption
(g) All significant post-balance-sheet events are reported.
Ans: Full disclosure principle
(h) Revenue is recorded at point of sale.
Ans: Revenue recognition principle
(i) All important aspects of bond indentures are presented in financial statements.
Ans: Full disclosure principle
(j) Rationale for accrual accounting.
Ans: Expense recognition and revenue recognition principles
(k) The use of consolidated statements is justified.
Ans: Economic entity assumption
(l) Reporting must be done at defined time intervals.
Ans: Periodicity assumption
(m) An allowance for doubtful accounts is established.
Ans: Measurement (fair value) principle
(n) Goodwill is recorded only at time of purchase.
Ans: Measurement (historical cost) principle
(o) A company charges its sales commission costs to expense.
Ans: Expense recognition principle
PROBLEM 3-1
(a)
Cash
Sept.
Equipment
20,000 Sept. 4
680
1,690
942
20
980
10
430
18
3,600
19
3,000
30
1,800
30
85
Sept.
17,280
Owners Capital
Sept.
19
3,000 Sept.
Bal.
20,000
30
6,007
30
23,007
17,280
30
13,680
30 Bal 12,133
Accounts Receivable
Sept. 14
5,820 Sept. 20
25
2,110
Bal. 30
6,950
980
Accounts Payable
Sept.
18
3,600 Sept.
Bal.
Rent Expense
Sept.
680 Sept.
30
680
Supplies
Sept.
Bal.
5
30
942 Sept.
612
Service Revenue
30
330
Sept.
30
9,620 Sept.
1,690
14
5,820
25
2,110
9,620
Office Expense
Sept. 10
30
430 Sept.
30
Accumulated DepreciationEquipment
515
85
515
515
30
1,800 Sept.
30
1,800
Supplies Expense
Sept.
30
330 Sept.
30
9,620
330
Sept`.
30
288
Depreciation Expense
Sept.
30
288 Sept. 30
Income Summary
288
Sept.
30
680 Sept.
30
515
30
1,800
30
330
30
288
30 Inc.
30
9,620
6,007
9,620
(b)
9,620
Credit
Cash .......................................................................................................................
$12,133
Accounts Receivable ............................................................................................
6,950
Supplies .................................................................................................................
612
Equipment.............................................................................................................
17,280
Accumulated DepreciationEquipment ...........................................................
288
13,680
17,000
Service Revenue....................................................................................................
9,620
$40,588
(c)
$9,620
Expenses:
Salaries and wages expense ........................................................
$1,800
Rent expense ................................................................................ 680
Supplies expense .......................................................................... 330
Depreciation expense .................................................................. 288
Office expense .............................................................................. 515
Total expenses ........................................................................
3,613
$6,007
6,007
26,007
3,000
Assets
Cash
$12,133
Accounts payable....................................
$13,680
Supplies .............................................
612
(288)
(d)
Credit
Cash ...................................................................................................
$12,133
Accounts Receivable ........................................................................ 6,950
Supplies .............................................................................................
612
Equipment ........................................................................................17,280
Accumulated DepreciationEquipment .......................................
288
13,680
23,007
Totals ...................................................................................
$36,975
$36,975