Need Accounting help... due in couple of hours.

Chapter 4 Homework

Due Week 2 and worth 10 points

Directions: Answer the following four questions on a separate document. Explain how you reached the answer or show your work if a mathematical calculation is needed, or both. Submit your homework assignment using the homework assignment link in the course shell.

E4-1

The following independent situations require professional judgment for determining when to recognize revenue from the transactions.

(a) Southwest Airlines sells you an advance-purchase airline ticket in September for your flight home at Christmas.

(b) Ultimate Electronics sells you a home theater on a “no money down and full payment in three months” promotional deal.

(c) The Toronto Blue Jays sell season tickets online to games in the Skydome. Fans can purchase the tickets at any time, although the season doesn’t officially begin until April. The major league baseball season runs from April through October.

(d) You borrow money in August from RBC Financial Group. The loan and the interest are repayable in full in November.

(e) In August, you order a sweater from Sears using its online catalog. The sweater arrives in September, which you charged to your Sears credit card. You receive and pay the Sears bill in October.

Instructions:

Identify when revenue should be recognized in each of the above situations.

E4-3

Here are some accounting reporting situations.

(a) Bonilla Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain.

(b) Barto Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.)

(c) Lopez, Inc. is carrying inventory at its original cost of $100,000. Inventory has a fair value of $110,000.

(d) Ryno Hospital Supply Corporation reports only current assets and current liabilities on its balance sheet. Equipment and bonds payable are reported as current assets and current liabilities, respectively. Liquidation of the company is unlikely.

(e) Liu Company has inventory on hand that cost $400,000. Liu reports inventory on its balance sheet at its current fair value of $425,000.

(f) Sara Toney, president of Classic Music Company, bought a computer for her personal use. She paid for the computer by using company funds and debited the “Computers” account.

Instructions:

For each situation, list the assumption, principle, or constraint that has been violated, if any. (Some were presented in earlier chapters.) List only one answer for each situation.

E4-9

The ledger of Beckett Rental Agency on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared.

	Debit	Credit
Supplies	$ 3,000
Prepaid Insurance	3,600
Equipment	25,000
Accumulated Depreciation—Equipment		$ 8,400
Notes Payable		20,000
Unearned Rent Revenue		12,400
Rent Revenue		60,000
Interest Expense	0
Salaries and Wages Expense	14,000

An analysis of the accounts shows the following.

1. The equipment depreciates $280 per month.

2. Half of the unearned rent revenue was earned during the quarter.

3. Interest of $400 is accrued on the notes payable.

4. Supplies on hand total $850.

5. Insurance expires at the rate of $400 per month.

Instructions:

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expense, Insurance Expense, Interest Payable, and Supplies Expense.