In: Accounting
2. |
When should an expenditure be recorded as an asset rather than an expense? (2 criteria) |
3. |
What are three types of errors that a trial balance will NOT reveal? |
4. |
Explain why stockholders’ equity is affected by all revenues, expenses and dividends, but NOT by all cash receipts. |
5. |
If Bennington, Inc. makes a payment to another company in advance of receiving a product or service, the company receiving the money will make a journal entry to record unearned revenue. How will Bennington record that same payment on its books? |
6. |
Pappy Corporation receives cash of $36,000 on September 1, 2017 for one year’s rent in advance. a) What journal entry should Pappy make to record the receipt of the $36,000? b) What journal entry should Pappy make on December 31, 2017? |
ans 2 an expense should be recorded as asset when the expenditure is expected to generate revenue for a period which is more than one year. | |||||||||
the example are furniture, equipment,land etc. these assets can be depreciable or non depreciable asset. The depreciable asset is depreciated | |||||||||
over the useful life of assets. These are revenue generating assets. | |||||||||
ans 3 | |||||||||
three tyope of errors are | |||||||||
1 posting to wrong accounts | |||||||||
2 error of amount in thebooks which are original | |||||||||
3 compensating errors | |||||||||
ans 4 | |||||||||
advance to supplier dr | |||||||||
cash cr | |||||||||
ans 5 | |||||||||
a | |||||||||
cash dr 36000 | |||||||||
unearned rent cr 36000 | |||||||||
b | dr | cr | |||||||
unearned rent dr 36000/12x4 | 12000 | ||||||||
rent revenue | 12000 | ||||||||
if any doubt please comment |